Roku's reliance on advertising makes it an attractive buy as competition for streaming video subscriptions ramps up, Needham says.
Roku, which sells hardware and advertising, is poised to take a large chunk of the $70 billion U.S. television ad market while Netflix struggles with increased competition for subscriptions, Laura Martin and Dan Medina of Needham said in a client note Monday.
"Roku is the dominant internet aggregator for streamed TV & movie content, like YouTube is for user generated content, at about 1/20th the valuation," the analysts wrote. Needham, which has a buy rating on the stock, estimated that Roku reaches 80 million Americans. The firm raised its price target on Roku to $150 per share from $120. Shares rose 2.6% in premarket trading.
Roku provides a menu of streaming video services on a platform that allows for targeted advertising. It does not charge subscriptions or spend large amounts of money on content, like Netflix and Hulu, but it does negotiate revenue sharing agreements with the streaming services it offers.
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