Roku stock jumped on Wednesday after the streaming video platform received a pair of upbeat reports from Wall Street analysts who noted its user growth and pending deals. Roku (ROKU) surged into record high territory on the news.
Needham analyst Laura Martin says investors should sell Netflix (NFLX) stock and buy Roku stock. She rates Netflix stock as underperform and Roku stock as buy. Martin has a price target for Roku of 315.
On the stock market today, Roku stock rose a fraction to 306.23. Earlier in the session, it gapped up to all-time high of 328.74. Elsewhere, Netflix stock sank 3.7% to 493.60.
“We believe that 2021 will unmask fundamental weaknesses in Netflix’s growth story and also unmask Roku’s powerful advertising growth engine on its larger installed base, which Covid-19 pulled forward by a year, we calculate,” Martin said in a note to clients Wednesday.
Disney+ Could Overtake Netflix Within Two Years
Netflix is the leader in subscription streaming video today, but faces a strong challenger in Walt Disney‘s (DIS) Disney+ service.
“Disney+ has 73 million streaming subscribers after just 12 months, so it will take ‘industry leadership’ away from Netflix within 18-24 months,” she said. Netflix ended the third quarter with just over 195 million subscribers worldwide.
Martin believes Netflix’s subscriber count will fall in 2021 as the world emerges from the Covid-19 crisis and consumers find other diversions.
Meanwhile, Roku will see upside in 2021, driven by its growing installed base, she said. Martin forecasts Roku reaching 51 million active accounts by the end of December, up from 46 million at the end of September.
Roku Stock Receives Price Target Hike
Separately, Citi analyst Jason Bazinet reiterated his buy rating on Roku stock and raised his price target to 375 from 220.
Bazinet sees positive catalysts in expected distribution deals for Discovery‘s (DISCA) Discovery+ and AT&T‘s (T) HBO Max. He also sees further upside potential in Roku’s international expansion efforts.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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