Analysts have price targets as high as $600 on the streaming pioneer, but one Wall Street pro boosting his goal to $390 on Friday is noteworthy.

Key Points

  • Matthew Thornton at Truist is raising his price target on Roku from $367 to $390.
  • At least three different fellow analysts lowered their price goals for the stock following a poorly received quarterly update three weeks ago.
  • Roku shares have fallen by nearly 20% in August, making the price-target boost both rare and welcome.

With the popularity of streaming video continuing to ascend and Roku (NASDAQ:ROKU) firmly entrenched as a market leader, its not surprising to see Wall Street warming up to the niche pioneer. Truist analyst Matthew Thornton raised his firms price target on the shares from $367 to $390 today. He has a buy rating on Roku stock.

The move may not seem like much. Thorntons new price goal is just 11% ahead of where Roku closed on Thursday. There are plenty of analysts with higher numbers out there. Daniel Kurnos at Benchmark turned heads in setting a Street-high target of $600 back in February that continues to stand. Thorntons move is still a welcome sight for Roku bulls in what has been a very disappointing month. Shares of Roku have tumbled 18% in August, so even a small victory is a win worth celebrating. 

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Image source: Getty Images.

Analyze this

Thornton is boosting his price target on Roku after sizing up a quarterly report earlier this month that the market itself found problematic. Roku shares tumbled following the second-quarter financial update three weeks ago, as investors became concerned about a sequential dip in usage and a warning that margins will come under pressure as supply chain constraints and cost increases eat into its bottom-line performance for the next couple of quarters.

A couple of analysts have lowered their price targets on Roku following the poorly received quarterly results. The latest move came last week when Citi analyst Jason Bazinet reduced his goal on the shares from $450 to $410 and lowered his active account forecasts in light of the recent deceleration. 

Bazinet at $410 is better than Thornton at $390, but right now those price targets are passing ships. Its good to see any price goal move higher, weeks after many other market watchers went the other way.

Expectations have been reset, and thats a good thing in Thorntons eyes. He feels that the current consensus estimates are reasonable and more than achievable. Despite Rokus near-term hiccups on the cost and supply front, the long-term addressable market growth is still there for the taking.

Theres a lot to like in Roku here at its current price tag. Rokus ability to monetize its still-expanding audience keeps improving. The sequential dip in streaming hours is easily explained by the country starting to venture back outside in the springtime of this year as the COVID-19 crisis seemed to be initially subsiding before the delta variant surge brought many of us back inside for the current quarter. 

With investments in original content making Roku stand out even more in the market for streaming hubs and Rokus audience of 55.1 million continuing to grow, the August swoon could be a buying opportunity. Investors can place their chips on which of the streaming service stocks they feel will come out ahead, but the smarter gamble could just be to bet on the basket of streaming services by going with Roku as the gateway to the streaming experience. The stock got cheaper this month, but its no clearance sale.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Rick Munarriz owns shares of Roku. The Motley Fool owns shares of and recommends Roku. The Motley Fool has a disclosure policy.

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