Roku Inc (ROKU) saw substantial growth over the past six months. The digital media and streaming pioneer recently slid on the WhaleWisdom Heatmap but saw hedge funds buying. Overall, Roku outperformed the S&P 500, rising by approximately 146.9% compared to the S&P’s gain of about 28.6% since the beginning of 2020.
Roku manufactures streaming media players and television-related audio devices, providing marketing services that allow advertisers to engage consumers. Roku offers access to streaming media content from various online services such as Netflix and Disney Plus. Roku’s television (TV) models are also available through licensing arrangements. Roku offers several free TV and movie channels, including its namesake, the Roku Channel. Roku continues to benefit from the accelerated consumer shift to streaming that occurred during the coronavirus pandemic. As coronavirus vaccinations increase and the economy continues to open, some investors are cautious of the impact on the streaming entertainment factor.
Mixed Results from Hedge Funds and Institutions
Hedge funds are buying, in contrast to institutions. Looking at first-quarter activity by the top hedge funds, the aggregate 13F shares held increased to about 21.8 million from 20.6 million, a change of approximately 5.8%. Of the hedge funds, 34 created new positions, 62 added to an existing holding, 26 exited, and 66 reduced their stakes. In contrast to hedge funds, institutions decreased their aggregate holdings by about 2.0% to approximately 80.1 million from 81.7 million. Roku dropped slightly on the WhaleWisdom Index to a ranking of 38 from 37.
Revenue Estimates Are Encouraging
Analysts expect to see revenue growth from 2021 through 2022, rising to $3.8 billion by December 2022 from $2.7 billion in 2021. Earnings estimates are forecast to increase to $1.02 per share in 2022, up from a 2021 estimate of $0.37.
Analysts Share Mixed Ratings
While most analysts appear to agree on Roku’s growth potential, price targets show movement in both directions. Evercore ISI analyst Shweta Khajuria raised Roku’s price target to $430 from $400 and kept an Outperform rating on shares. Khajuria noted that active Roku accounts increased, and various initiatives align with a three-year growth forecast. Meanwhile, Justin Patterson of KeyBlanc Capital Markets, Inc. lowered his firm’s price target on Roku to $460 from $518 while maintaining an Overweight rating on shares. Citigroup Inc. analyst Jason Bazinet also lowered the price target on Roku to $450 from $460 and kept a Buy rating.
Favorable Long-term Outlook
Roku’s impressive year-to-date growth is encouraging for investors. For as long as consumers continue to shift to streaming content instead of paying for traditional TV or view the Roku device as a convenient, centralized alternative to access channels they have already purchased, the company stands to see favorable returns. While Roku has experienced mixed ratings from investment firms, multi-year estimates speak to the stock’s long-term potential.