Why Roku stock has risen again today

What happened

Actions of Roku (NASDAQ: ROKU) were up 2% at 9:35 a.m. EDT Thursday after Rosenblatt securities analyst Mark Zgutowicz reiterated a buy note on the stock with a price target of $ 560. This represents a significant increase from the current quote of $ 325.

So what

The gains follow a 5.6% increase on Wednesday after Roku released its annual streaming survey, The Streaming Decade, which said “TV streaming has passed a tipping point”.

Consistent with this report, Zgutowicz believes Roku has strong momentum right now, which should translate into “strong platform revenue and gross margin” performance when the company releases its results in November.

Image source: Getty Images.

Even though the grand reopening continued into the first half of 2021, Roku reported accelerating revenue growth. Revenue increased 81% year-over-year in the second quarter, driven by a 117% increase in platform revenue, boosted by advertising.

Now what

Recent gains in advertising are likely the start of a wave of longer-term investments by brands looking to shift their advertising dollars to streaming services. Roku now has 55 million active accounts, with a complete advertising management solution in its OneView advertising platform that should make it attractive to advertisers.

Management expects revenue to increase 51% year-over-year in the third quarter to $ 680 million. Gross margin is expected to improve slightly less, with an increase of 49% year-over-year, and management also expects increased operating expenses related to hiring, product development, sales. and marketing, which should make adjustments EBITDA to $ 65 million.

Additionally, Zgutowicz doesn’t expect Roku to experience significant supply chain disruptions during the holidays.

All in all, the analyst believes Roku is a buy ahead of earnings next month, and given the recent pullback in the stock price in addition to the publicity momentum, he might be right with his bullish call.

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

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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