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Why Roku Stock Rose Today

By Joe Tenebruso – Sep 23, 2021 at 3:22PM

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The streaming software leader is set to deliver sizable rewards to investors, an analyst says.

What happened 

Shares of Roku (ROKU -7.10%) climbed on Thursday, following bullish analyst commentary. As of 2:32 p.m. EDT today, the streaming media company's stock price was up more than 3%. 

So what 

Guggenheim Partners analyst Michael Morris raised his rating on Roku's shares from neutral to buy. He now sees the stock's price rising roughly 18% to $395 in the year ahead. 

A digital bull is climbing a rising stock chart.

Roku's shareholders could be in store for handsome gains. Image source: Getty Images.

Morris argued that Roku is well positioned within the rapidly expanding connected-TV market. He expects the streaming leader's advertising tools to enjoy booming demand, as more businesses shift their marketing spending to digital channels.

Morris also highlighted Roku's intriguing opportunity in international markets, where the connected-TV industry remains early in its growth cycle. 

Now what 

Roku has emerged as a powerhouse in streaming. It has the top-selling smart-TV operating system in the U.S. with a nearly 40% market share. 

The company's active accounts surged 28% year over year to 55.1 million in the second quarter. Ad dollars follow eyeballs, and Roku more than doubled its monetized video ad impressions compared to the prior-year period. Together, this helped Roku's net revenue and gross profit soar 81% and 130%, respectively, to $645 million and $338 million. 

"Audiences, content, and advertisers continue their shift to TV streaming around the globe, and Roku is a key enabler of this long-term secular trend," CEO Anthony Wood and CFO Steve Louden wrote in a letter to shareholders. And with this global trend still in its early stages, Roku is poised for strong growth in the coming years.

Thus, Morris's $395 price target seems not only possible but probable, and long-term investors could enjoy even greater gains.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Roku. The Motley Fool has a disclosure policy.

Stocks Mentioned

Roku Stock Quote
$56.42 (-7.10%) $-4.31

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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