Dreamstime
Roku,
like other tech stocks, got caught up in a mini selloff this year, but it may be time to jump back in, according to
The television streaming device maker is down 20% from its last earnings report on Feb. 18, compared with the 4% gain in the
over the same time, the bank’s analyst wrote in a note on Thursday. But it’s time to “buy the dip,” he said.
“While many growth-oriented tech companies have faced challenges in the current rate environment, with the transition to streaming continuing at a rapid pace, we see the recent pullback in Roku’s stock as a good buying opportunity,” Deutsche Bank analyst Jeffrey Rand said.
Recent moves have set Roku up to increase its advertising revenue and its viewing audience, including the purchase of content from Quibi and the “This Old House” franchise as well as a partnership with
Rand calls the stock a Buy, with a price target of $500, suggesting the stock could gain 35% over its current price. Roku shares rose 2.4% on Thursday and are up 11.8% this year compared with the 9% gain in the S&P 500.
It’s just the latest optimistic rating for Roku. Earlier this week, Evercore ISI started the stock at an Outperform with a $400 price target. Last week. Truist raised it to a Buy, citing the recent price drop.
Roku’s future deals are likely to be focused on increasing content for the Roku Channel and increasing advertising for the streaming platform as well as for traditional television.
People have been concerned about the future of the Roku Channel, which streams free content and subscription channels, because networks such as
Comcast’s
NBC have started to claim popular shows exclusively for their own streaming platforms.
Roku has been busy adding exclusive shows, such as the Quibi content. Deutsche Bank’s Rand said he did not expect Roku to move into developing its own offerings, like
and
Amazon’s
Prime, because the cost would be too high and the competition too strong.
Roku’s deal for Nielsen’s advertising business is also seen as a growth strategy. Roku has more than 51 million subscribers who use its platform to stream live television and subscription services like
The Nielsen piece makes it possible for Roku to make money off people who watch TV the old fashioned way: tuning into their shows on the day and time they are scheduled and on their original channel, which is now called “linear” TV.
Roku is expected to continue to make deals “to expand the role it plays in the ad market, both for streaming and linear TV,” Rand said.
Write to liz.moyer@barrons.com
