Roku Stock Scores Another Wall Street Upgrade

Analysts have turned bullish on the streaming-video specialist in back-to-back days — with higher price targets, to boot.

| More on:
You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

For the second time this week, an analyst is boosting his rating on Roku (NASDAQ: ROKU). Mark Mahaney at RBC Capital is lifting his call on shares of the streaming-video specialist from sector perform to outperform. He’s also jacking up his price target on Roku from $107 to $155, a new price goal that suggests 33% of upside from current levels.

Mahaney downgraded the stock more than three months ago, a move that may seem like a smart call given the brutal sell-off in the stock over the past few weeks, but Roku shares have actually moved 27% since his downgrade. Mahaney joins Tim Nollen at Macquarie, who also updated his previously neutral stance to an outperform position, along with a higher price target a day earlier. There’s no such thing as easy money out there, but it’s encouraging to see a stock get back-to-back days of upgrades after a brutal correction since peaking in early September.

The timing couldn’t be better

It’s always interesting to watch what Wall Street does in the weeks between a quarter’s end and when that company reports fresh financials. Analyst moves ahead of earnings season tend to be based on how they feel the market will react following a company’s financial release.

RBC’s Mahaney argues that the stock is more compelling following its recent 31% pullback, but that obviously wasn’t the case at the time of his early July downgrade. You can upgrade a stock based on a stock correcting, but when the price target gets sauced up, it’s a pretty bullish indicator. Mahaney sees Roku as one of the best ways for investors to play the streaming revolution, and he views the company’s fundamentals as some of the strongest among small-cap internet stocks.

Roku has been one of this year’s hottest growth stocks, nearly quadrupling in 2019. It won’t report until much later this earnings season. Its third-quarter results are unlikely to be announced until early November, or roughly four weeks from now.

A lot can naturally happen between now and then, but the narrative for Roku remains the same: It’s building its audience rapidly, up 39%, to 30.5 million accounts over the past year. The glut of new services rolling out in the coming months will only help increase Roku’s popularity as the platform that plays nice with all of the leading services.

Analysts probably don’t want to be caught with bearish or even neutral calls when Roku reports next month. Its last quarter was a stock-catapulting blowout, and there’s no reason to think that folks aren’t leaning on their Roku systems more than ever. As bad a beating as the stock took over the past month, it wouldn’t be a surprise to see it inch higher leading into its third-quarter update.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Rick Munarriz owns shares of Roku. The Motley Fool owns shares of and recommends Roku. The Motley Fool has a disclosure policy.

More on Tech Stocks

Business man on stock market financial trade indicator background.
Energy Stocks

Market Volatility: 2 Value Stocks to Buy Right Now

The market volatility does not look like it will let up any time soon, but these two stocks are too…

Read more »

movies, theatre, popcorn
Tech Stocks

Cineplex Stock Shoots Up as Meme Stocks Rally

Cineplex (TSX:CGX) stock seems to have started a rebound after meme stocks started climbing on Monday. But should investors buy…

Read more »

Target. Stand out from the crowd
Tech Stocks

This Is, Hands Down, the Top Canadian High-Growth Stock to Buy This Week

I expect this attractive Canadian high-growth stock to rally in the near term, as it’s set to announce its latest…

Read more »

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Tech Stocks

Why Sierra Wireless (TSX:SW) Stock Has Surged 79% in 2022

Sierra Wireless Inc. (TSX:SW)(NASDAQ:SWIR) is a tech stock that has soared on the back of a big acquisition announcement last…

Read more »

Financial technology concept.
Tech Stocks

BlackBerry Stock is Rallying! Buy Before It’s Too Late

BlackBerry’s improving fundamentals have helped its stock soar lately and outperform the broader market.

Read more »

A gamer uses goggles to play an augmented reality game. tech
Tech Stocks

The Best U.S. Tech Stocks to Buy in August

Tech stocks in the U.S. such as Microsoft and Broadcom have the potential to generate massive wealth for long-term investors.

Read more »

grow money, wealth build
Tech Stocks

How to Create $100,000 by Investing $500/Month

These two TSX stocks will aid you in building wealth of $100,000 over the next 8.5 years.

Read more »

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Tech Stocks

This Battered Growth Stock Could Soar Over the Next 3 Months

Docebo (TSX:DCBO)(NASDAQ:DCBO) is a top work-from-anywhere stock that may be in for a sizeable move to the upside in coming…

Read more »