What happened
Shares of Roku (ROKU 0.15%) pushed higher Tuesday, jumping as much as 6%. As of 1:05 p.m. ET, the stock was still up 3.1%.
The catalyst that sent the streaming video pioneer higher was a bullish take by a Wall Street analyst.
So what
D.A. Davidson analyst Tom Forte issued positive commentary on Roku, maintaining his buy rating and $200 price target on the stock, according to The Fly. That suggests potential upside for investors of roughly 66% over the coming year. After meeting with Conrad Grodd, Roku's head of investor relations, Forte came away bullish on the company's prospects.
Image source: Getty Images.
The analyst notes that, contrary to popular opinion, Roku's advertising business has been "modestly positively" impacted by Apple's (AAPL 1.27%) recent privacy moves. The iPhone maker recently updated its privacy settings, which now requires users to specifically opt-in to allow ad tracking within each app. Some investors feared the move would be a headwind for the targeted advertising that appears on Roku's platform.
Additionally, the company's focus on ad authentication is having the "desired effect," driven by Roku's treasure trove of viewer data, which helps place the ads in front of the consumers most likely to act on them.
Other takeaways by the analyst are that it's still early days regarding Roku's efforts to increase its average revenue per user (ARPU) and the company is making strides to move from hardware to software, which will advance Roku's expansion strategy in the streaming video space.
Now what
Forte may be onto something. A quick check of Roku's regulatory filings shows the company has increased its ARPU sequentially in each and every quarter going back five years, surging more than 343% since late 2016.
Some investors fear the temporary lull in Roku's active account growth and streaming hours will become permanent. That fails to take into account the tough comps resulting from the early pandemic-era growth when lockdowns and work-from-home orders were common, giving consumers much more time for streaming. There's also Roku's price-to-sales ratio of 6, which has fallen to its lowest level since early 2019, while its revenue has surged 272%.
Given its vast potential and consistent growth, investors that buy Roku stock now will likely look brilliant five years from now.
