If there's one thing that we've all become accustomed to over the last nine months, it's the value of streaming video. Whether we use it to connect at work, or use it to watch television, streaming video has proven its worth and then some. One of the biggest surprise beneficiaries of the streaming video movement is Roku (NASDAQ:ROKU), whose share price has been rapidly climbing, and just got another bump today as Needham put out its new price target, the highest Wall Street has seen yet.
The Latest Bumped-Up Price Target
So the biggest news of the day hitting Roku is that Needham ramped up its price target on the company, from its previous assessment of $255 per share up to the new Street-high price of $315. A new high, yes, but not by near so much as you might think; back on November 6, both Benchmark and DA Davidson hiked their price targets on the company as well, putting them up to $300 each. Benchmark boosted its price from $185, and DA Davidson from an approximately-the-same $190.
The recent earnings report Roku rolled out certainly didn't hurt matters any; with the company's stock up just over 12% at one point, the earnings report made it clear that Roku is a force to be reckoned with in the increasingly-vital streaming video market.
A Growing Chorus
Given that the consensus price target, based on our latest research, is sitting at $213.09—which is about $64 and change under what it's currently trading at—it's a safe bet some more ramping up will arrive in the near-term unless a lot of analysts find these developments temporary. That seems to be anything but the case.
Looking at the wider community, we know about the latest moves at DA Davidson and Benchmark, but the overall consensus is even better. Right now, there is one “sell” rating on Roku, along with seven “hold” and 14 “buy” ratings. Just last month, there were two “sell,” five “hold” and 16 “buy.” That may be down a little bit, but the consensus price target was also sitting at $173.83. There seems to have been some sifting out as far as analysts go, and this is still the second-highest rating the company has seen in the last six months.
A Confluence of Factors
So why the sudden run-up in price targets? Could it be that analysts are seeing the writing on the wall and raising their price targets to reflect the current actual price? Could be, at least in part. There are other factors going into Roku's recent gains that may help pin down a truer cause.
Easily the biggest potential cause was the revelation that Roku is well on its way to landing HBO Max on its devices. The latest reports on the topic that emerged over the weekend suggest that a deal between Roku and AT&T (NYSE:T)'s WarnerMedia division is close at hand. Such a move would give Roku access to one of the biggest new streaming systems around. There won't be much of a first-mover advantage here, as Amazon (NASDAQ:AMZN) announced that it would have HBO Max available on its Fire TV platform as well, but it also removes an edge for Amazon.
That's not the only point in Roku's favor, though; recently, word has emerged about Roku's contribution to the holiday shopping season. What formerly would have been known as the Black Friday deals, before Black Friday got pretty much shut down thanks to the coronavirus, have emerged, and for those who want to get in on Roku, Roku's about to make it very, very easy. Whether shoppers want to go simple with a Roku Express stick that will be available for $24.99, or go all the way up to a Roku Streambar for $99, there will be several price points that make Roku an attractive buy.
Throw in a look at the macro-environment and a clear path to buying in on Roku emerges. Roku is a go-to hardware platform for many users out there, and considering that it offers a range of subscription services already, HBO Max would be just one more—albeit one very important “more”—in an already extensive stack. Remember that we're going into the holiday season, which kicks off winter in earnest in North America, and that means a lot more people staying in and streaming video.
Roku's bargain pricing and range of available content is making itself a very attractive proposition, going into a time when hardware platforms make excellent gifts and the streaming video they can access a welcome companion on cold winter nights. This is Roku's perfect storm. It's narrowing any gaps among competitors, and its special holiday pricing is improving its attractiveness. Buying in on Roku now should give investors access to all that potential.
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