Roku (ROKU 0.04%) was one of the star performers of 2020, climbing 148%, as the adoption of streaming video accelerated. While the recent rotation out of tech stocks has stung the streaming pioneer, shares will surge in the coming year.
That's according to Truist Securities analyst Matthew Thornton. On Tuesday, Thornton upgraded the stock to buy from hold, while lowering his price target from $480 to $367. The stock has tumbled in recent weeks as some investors temporarily abandoned tech stocks in favor of value plays. Thornton's new target represents potential gains for investors of roughly 22% over the stock's closing price on Monday of about $301.
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Thornton sees a more appealing valuation and cited several catalysts that he expects will drive Roku's stock higher in 2021. The company's ongoing international expansion, particularly in the U.K. and Brazil, which represent the third and fifth largest international TV markets, respectively, outside of China, will help spur growth.
The company also stands to benefit from the recent deal to acquire Nielsen Holdings' (NLSN) Advanced Video Advertising business, which will allow Roku to digitally replace ads from broadcast TV feeds with its own advertising.
Will Roku's stock hit $367?
It isn't a stretch to suggest that Roku's stock could climb 22% over the coming year, especially when you consider it was 38% higher less than two months ago.
The company's recent results paint a compelling picture. In the fourth quarter, revenue grew 58% year over year, driven by platform revenue that surged 81%. At the same time, active accounts of 51 million increased 39%, and the average revenue per user climbed 24%.
Given Roku's impressive growth, the potential for its shares to grow significantly from here is not only possible, but likely. If we look back a year from now, suggesting an increase of 22% will probably seem conservative.
