Roku's stock could leap 48% in 2021 as its streaming platform continues to eat up market share and advertising dollars, Wedbush says

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  • Wedbush reiterated its price target of $475 for Roku after the streaming company crushed first quarter earnings.
  • Analysts from the firm say Roku will continue to gain as advertising dollars move from linear TV to streaming.
  • Roku also has a growing user base, 54 million average active users in the first quarter who streamed over 18 billion hours.
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Even after reporting stellar first quarter earnings, Roku's show is far from over, said a group of Wedbush analysts led by Michael Pachter.

In a Friday note the analysts reiterated their "outperform" rating for Roku and price target of $475. That's a 48% jump from Roku's opening price on Friday.

Shares of Roku roared higher on Friday morning after the company reported adjusted EBITDA at $126 million, higher than the $27 million expected. Roku also beat revenue expectations, coming in at $574 million, versus the estimated $478 million.

Pachter said Roku continues to benefit from an accelerated user expansion during the pandemic, a secular shift from linear TV to streaming TV over the internet, and the early innings of an international expansion.

Roku logged 54 million average active users in the first quarter who streamed over 18 billion hours. Additionally, the amount of revenue Roku makes per user was 32% higher than the first quarter last year, he said.

"We expect advertisers to continue their migration from linear TV to over-the top on-demand, where Roku is a primary beneficiary as it has dominant market share, a rapidly growing user base, and superior targeting capabilities," said Pachter.

Also, Patcher noted that the bulk of advertising still occurs on linear TV, and he expects advertising dollars to continue to shift in Roku's direction as content continues to migrate to internet streaming platforms.

The analysts noted that Roku's share price is likely to remain volatile, but they see Roku as a "long-term growth story with plenty of runway ahead."

Shares of Roku jumped as much as 18.7% Friday before paring back some gains. The stock is hovering around $327 as of Friday 10:15 a.m. ET. Roku is down 1.4% year-to-date.

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