Roku Stock Can Benefit From Streaming Growth, Analyst Says

Roku stock has risen 25% this year. (Dreamstime)

Roku earnings will land next week, and one analyst believes the stock has more room to run from streaming.

Citizens analyst Matthew Condon raised his price target on Roku to $110 from $95, which implies an 18% increase from the stock’s closing price of $93.29 on Friday. Condon also maintained an Outperform rating on the stock.

Condon wrote in a research note that Roku can benefit as viewership transitions to streaming from traditional T.V. Research firm Nielsen reported in June that streaming accounted for more viewing hours than broadcast and cable combined for the first time ever in May.

It is expected that as people move to streaming, advertisers will follow. On top of selling physical Roku devices that allow users to watch streaming services on their TVs, Roku makes money through advertising.

“We expect both viewership and advertising budgets to continue to transition to streaming, providing a tailwind across our open web advertising coverage,” Condon wrote in a research note Monday.

Advertising growth is something investors are counting on. Shares of Roku dropped 8.5% on May 2 after the company reported first-quarter earnings and provided disappointing full-year revenue guidance.

“We are continuing to see shifts in advertising, and most of it’s driven by our clients really understandable need for greater flexibility in this macro environment. Some of the results of that are shorter planning cycles,” said Charles Collier, president of Roku Media, on the May 1 earnings call.

Wall Street seems confident Roku can benefit from the transition to streaming, though. The stock has risen 24% this year and 48% over the last 12-months.

Shares of Roku were off 1% to $92.37. Roku is expected to report second-quarter earnings on July 31.

Write to Angela Palumbo at angela.palumbo@dowjones.com