Roku’s huge underperformance this year has created an attractive buying opportunity for investors, according to Baird. Analyst Vikram Kesavabhotla upgraded the stock to outperform from neutral and hiked his price target by $20 to $90, implying more than 30% upside from Friday’s close. Year to date, shares are down nearly 25%. In contrast, the S & P 500 has risen around 23% this year. “ROKU is well positioned to capture the benefits of an ongoing transition toward streaming activity, having already achieved meaningful scale with ~86M active accounts,” he told clients in a Monday note. “We also believe the continued fragmentation of content and heightened industry focus on monetization/engagement should help magnify the value of ROKU’s platform.” ROKU YTD mountain ROKU, year-to-date In addition to industry trends that Kesavabhotla thinks are “increasingly favorable,” positive changes to the company’s strategy – such as the introduction of video ads on its home screen and the incorporation of new landing pages – could drive share growth in the long term, the analyst said. “Management is also expressing a disciplined approach toward operating expense growth going forward, which should allow ROKU to consistently deliver operating leverage over the coming years,” Kesavabhotla added. With that in mind, he sees the company delivering “sustained” double-digit revenue growth in its platform segment as well as more margin expansion. Wall Street is pretty neutral on the name, however. Among the 32 analysts covering Roku, 17 have a holding rating, LSEG data shows. Meanwhile, 13 of them have a strong buy or buy rating. The average target still implies sizable gains ahead, reflecting about 15% upside, as of Friday’s close. Shares jumped more than 3% in the premarket on the heels of the analyst’s call.
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