Roku Stock Forecast 2025
With so many people stuck at home last year as the COVID-19 pandemic slammed the world, demand for home entertainment skyrocketed as consumers desperately staved off boredom while trying to remain safe. That helped propel Roku (NASDAQ: ROKU) shares higher, gaining nearly 150% in 2020.
Roku stock is priced at lofty valuation premiums, currently trading at approximately 479 times earnings after recently becoming profitable for the first time. Engagement has been skyrocketing, with all of Roku’s core operating metrics putting up robust growth in recent quarters.
|Metric||Q1 ’21||YOY Growth|
|Active accounts||53.6 million||35%|
|Streaming hours||18.3 billion||49%|
In fact, Roku’s active account base of 53.6 million makes it bigger than any traditional cable company’s subscriber base—Comcast (NASDAQ: CMCSA) had just 18.6 million residential video customers as of the first quarter, a figure that is trending down due to cord-cutting.
Roku shares are worth around $417 right now, compared to the average Wall Street analyst price target of $453.18. The high valuation estimate is $560 while the low is $170.
Market Cap: 0
Roku Stock Forecast 2021
Prior to the pandemic, Roku was already building a robust advertising platform with sophisticated targeting capabilities following its purchase of dataxu in late 2019. The platform segment is now firmly in the driver’s seat for growth in both revenue and gross profit.
The bulk of platform revenue is derived from advertising, which is shifting away from traditional linear TV towards digital platforms. Roku has long argued that this is a secular megatrend, positioning itself to capitalize in the process.
Roku used to provide full-year guidance but paused the practice near the onset of the pandemic due to ongoing macroeconomic uncertainties. With the company expanding internationally, those global risks make it difficult to forecast and different countries continue to grapple with the virus to varying degrees of success (or failure).
The company is instead offering broad commentary around the future, saying that revenue growth comparisons in the second half of 2021 will be tough due to the extraordinary performance Roku reported in 2020. The consensus estimates currently call for $2.75 billion in revenue and $0.33 in earnings per share for 2021.
Roku Stock Forecast 2025
As advertiser budgets recover from the public health crisis while continuing to shift to connected TV (CTV) offerings, Roku should enjoy robust sales growth for years to come. Roku’s revenue could enjoy a compound annual growth rate (CAGR) of nearly 23% over the next five years, according to analysts.
Here are the consensus estimates for each year.
After reporting three consecutive quarters of profitability on a GAAP basis, the company is poised to scale earnings as it continues growing.
|Year||Earnings per Share||YOY Growth|
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Roku Stock Forecast 2030
As investors approach the end of the decade, Roku’s top line could be in the ballpark of $18 billion.
Over that same time frame, earnings per share (EPS) could soar 100-fold compared to 2021 estimated EPS if analysts are accurate.
|Year||Earnings per Share||YOY Growth|
Roku Bull Case
As a first mover in the CTV sector, Roku has built a strong brand that is instantly recognizable among many consumers. The company has established itself as an agnostic platform for all this streaming, helping leading video streaming services reach viewers while securing a share of the revenue it helps those companies generate.
Roku also caters to those services with a suite of advertising products that expand reach even further, allowing the company to monetize video streaming adoption in multiple ways.
In addition to continued execution in the United States to defend its dominant position, Roku’s international expansion is still in the early innings.
International revenue still represents less than 10% of revenue, but Roku plans to deploy the same time-tested growth strategy (grow the user base by selling hardware at low margins or licensing Roku OS to third-party TV manufacturers, then monetizing engagement with advertising and revenue-sharing arrangements) in new markets.
More recently, Roku jumped into original content by scooping up entertainment assets from defunct Quibi. While Quibi was promptly shuttered after flopping in the consumer market, Roku was able to acquire a massive library of content on the cheap, reportedly paying less than $100 million for the catalog.
Consumers made it abundantly clear that they weren’t willing to pay a monthly subscription fee for Quibi’s content, but Roku has an opportunity to monetize that same content under a different revenue model.
Roku Bear Case
With advertising becoming increasingly important to Roku’s business, the company is now exposed to new risks related to the marketing industry. Privacy is an important and delicate issue fundamentally related to targeted advertising and Roku will need to proceed cautiously while respecting privacy considerations.
The ad industry is also tied to macroeconomic cycles—ad budgets contracted significantly near the beginning of the pandemic, leading to a brief disconnect between monetization and engagement on Roku’s platform in mid 2020, for example—which may cause greater fluctuations in Roku’s business as well.
Roku may also fail to gain traction abroad, as international expansion often relies heavily on localization and adapting to different cultures around the world. Multinational corporations also must contend with numerous tax regimes and regulatory landscapes, which are complex tasks.
Nearly all major streaming services are betting big on original content, and Roku could end up losing a meaningful amount of money if it invests heavily in original content that fails to resonate with audiences.