Guggenheim analyst: Roku shares could climb by 20%

By: Wajeeh Khan
Wajeeh Khan
Wajeeh is an active follower of world affairs, technology, an avid reader, and loves to play table tennis in… read more.
on Sep 23, 2021
  • Guggenheim's Michael Morris upgrades Roku to "buy" with a PT of $395.
  • Roku to launch its streaming devices in Germany later this year.
  • Shares of the company have crashed more than 30% since late July.

Shares of Roku Inc (NASDAQ: ROKU) have crashed more than 30% since late July, but Guggenheim says it might be a good idea to buy the dip.

Michael Morris upgrades Roku to ‘buy’

In a note on Thursday, Guggenheim’s Michael Morris upgraded the stock to “buy” with a price target of $395 that translates to a 20% upside from here.

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The analyst expects Roku to climb as impression-based advertising continues to gain traction and the broader advertising market recovers from the pandemic lows. Morris also expressed confidence that the streaming giant was likely to win more advertisers as it further expanded on its “original content”. The note read:

We expect the connected television ad marketplace will continue to grow at a rapid pace and that Roku will be a primary beneficiary — this view is unchanged.

Guggenheim’s update on Roku comes a month after Citigroup downgraded its target on Roku Inc from $450 to $410 – still above Morris’ current price target.

Other factors that could drive growth for Roku

Earlier this month, Roku said its streaming devices would be available for users in Germany before the end of the year.

Morris expects “international expansion” to help broaden Roku’s total addressable market, with more than 100 million active accounts outside of the United States by the end of this decade, versus 5.6 million currently. The analyst said:

We see the value in the company’s incremental international expansion, potential for additional targeted marketing partnerships and expanded advertising tools as underappreciated.

The U.S. company acquired Nielsen’s Advanced Video Advertising (AVA) business in April that Morris expects to be a growth driver as it helps Roku in assessing viewer behaviour.

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