Roku Inc (ROKU) experienced positive growth over the past six months, outperforming the S&P 500 and rocketing up the WhaleWisdom Heatmap to the number one ranking in the second quarter from 38 in the first quarter. Roku’s stock rose by approximately 162.3% by August 20, 2021, compared to the S&P’s gain of about 36.4% since the beginning of 2020.
Roku manufactures various digital media players for streaming videos and accessing content such as games and movies. The company has a television model in the United States. It makes additional money through hardware sales, Roku Channel advertising, and branded content. Roku also benefitted considerably from a consumer shift to streaming entertainment during the coronavirus pandemic.
Hedge Funds Are Buying
Roku experienced a positive second quarter, with hedge funds and institutions adding shares to their portfolios. The aggregate 13F shares held by hedge funds increased to about 23.1 million from 21.9 million, a change of about 5.3%. Of the hedge funds, 34 created new positions, 77 added to an existing stake, 29 exited, and 55 reduced their holdings. Institutions increased their aggregate holdings by about 3.2% to approximately 82.8 million from 80.2 million. The 13F metrics between 2016 and 2021 reflected Roku’s rising stock price.
Encouraging Two-year Estimates
Analysts expect to see earnings rise over the next two years, with increases in growth from 2021 to 2022, bringing earnings per share to $1.55 by December 2022, up from $1.19 for 2021. Revenue forecasts are estimated at approximately $2.8 billion by 2021 and $3.8 billion by 2022.
Analysts’ Ratings Vary
While Roku’s stock growth has been robust, many investment firms are trimming target prices. Wells Fargo & Co. and Stephens & Co. held an overweight rating on the stock while cutting price targets on Roku’s shares. Wells Fargo lowered its price target to $488 from $519, while Stephens & Co. reduced it to $475. Citigroup analyst Jason Bazinet lowered its price target on Roku to $410 from $450, based upon predictions of lower account growth. However, while account growth was disappointing, platform revenue was encouraging, so Bazinet maintained a buy rating.
Roku’s year-to-date growth is encouraging. The company continues to be a leader in digital media and streaming devices, with optimistic two-year revenue estimates. While some analysts have conservatively lowered price targets, investment potential remains on an upward trend.