Roku stock price has bounced back in the past few weeks, reaching a high of $86, its highest level since February. It has jumped by about 38% from its lowest level in November and 71% above the year-to-date low. It remains about 83% from its all-time high.
Roku’s business is still growing
The most recent financial results showed that Roku’s business was doing well. The numbers revealed that the number of streaming households jumped to 85.5 million in the last quarter, up from 75.8 million in the same period last year.
Roku’s streaming hours have also continued rising in the past few months. Its streaming hours rose from 26.7 billion in Q3’23 to 32 billion, a 20% increase.
Its business has continued growing across its platform and devices. Its platform revenue rose by 15% to $908 million, while its devices rose by 23% to $154 million.
Roku’s devices revenue comes from selling its devices, while its platform one comes from its subscription and advertising. Its devices are the streaming player, television and other products.
Analysts expect that Roku’s business will continue doing well. The average revenue estimate for the quarter is $1.14 billion, a 15% increase from the same period last year.
For the year, Roku is expected to make $4.05 billion, a 16.2% annualized increase. It is also expected to make $4.6 billion in 2025, a 13% annualized increase. There are signs that its business will do well even as competition rises.
Roku has a 27% market share in the connected TV business, followed by Samsung, Amazon Fire, Apple TV, LG, and Xiaomi.
Analysts believe that Roku can be a good acquisition target because of the challenges of going it alone. One of the potential tie-up is The Trade Desk, a company that offers advertising solutions. Trade Desk is also working on TV OS, which analysts believe will take years to be more competitive.
In a statement on Wednesday, analysts at Needham noted that data was its most undervalued asset. The analyst also expects that it can become a good takeover asset in 2025.
Analysts believe that the company is highly undervalued as its annual revenue has risen from $1.128 billion in 2019 to over $3.48 billion last year. Its trailing twelve-month revenue was $3.8 billion.
Roku will also become a highly profitable company because of its high-margin approach to marketing. Assuming that its net profit margin rises to 8%, it means that its profit will be about $368 million. Given that it has a market cap of $10 billion, it has a hypothetical P/E ratio of 27.
Roku stock price forecast
ROKU chart by TradingView
The weekly chart shows that the Roku share price formed a slanted double-bottom pattern around the $50 level. It is approaching the important resistance at $108.53, its highest level in December last year.
Roku shares have moved above the 50-week Exponential Moving Average (EMA). The Relative Strength Index (RSI) and the MACD indicators have also pointed upwards in the past few weeks.
The stock has formed an inverse head and shoulders chart pattern. Therefore, the short-term outlook for the stock is bullish, with the next point to watch being at $108.53, its highest level in January. A move above that level will point to more gains, possibly to the 23.6% retracement point at $144.42, which is about 76% above the current level.
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