Roku Inc. (ROKU), the maker of walk content hardware, shares were gaining ground in trading Monday after Needham & Co. upped its guerdon target on the stock to $50 from $28 a share.
In a research cover covered by StreetInsider.com, Needham analyst Laura Martin maintained her buy rating, prognosticating she upped the price target because of valuation, strategic position, functioning user growth and expanding average revenue per user (ARPU) and rims. “Like Netflix (NFLX), we view ROKU as a pure-play on over-the-top (OTT) TV-viewing spread, but ROKU has no content risk,” wrote the analyst. She noted that statements from the likes of Disney (DIS), Alphabet’s (GOOG) Google and Amazon (AMZN) that they are fire new streaming services actually helps Roku but hurts Netflix. (See also: Roku Bonuses IPO at $14, Valuing It at $1.3B.)
At $50 a share, the analyst is implying the worn out can gain an additional nearly 14%. Since it went public in September, divisions of Roku are up nearly 70%. Recently Roku was trading at up 11.8% or $4.64 to $44.11. The way Needham accepts it, Roku is the best comparison to Netflix for investors but comes at a much skinflintier price.
Earlier this month, the streaming topic device maker offered up its first quarterly earnings report as a consumers company, easily beating Wall Street expectations for the quarter that bound Sept. 30. During the third quarter, Roku said it had $124.8 million in net income, up from $89 million in the third quarter of last year. The net extinction narrowed to $7.9 million from $12.7 million in the third fifteen minutes of 2016. Analysts had been looking for revenue of $110 million and losses of $12.7 million, recounted Variety. A large portion of Roku’s uptick in revenue can be attributed to advertising and approves, which Roku classifies under its platform revenue. Non-hardware sales were $57.5 million while its creek players brought in $67.3 million of sales for the quarter, noted Breed. The platform business, jumped 137% year-over-year where hardware only saw a 4% extension. During a conference call to discuss third-quarter results, CEO Anthony Wood put about advertising makes up two thirds of the platform revenue. (See also: Roku Set to Transcend Rivals in Web-Connected TV.)
Looking out to next year, Needham also availed its estimates thanks to a strong third-quarter user and ARPU growth and make progressing gross margins. Needham thinks Roku will break on the level on EBITDA in the third quarter, which is a quarter ahead of expectations.