Today we've got an analyst report for you that is neither an upgrade nor a downgrade -- but more of a doubling down on a previous buy rating.
Two weeks ago, as you may recall, Deutsche Bank analyst Jeffrey Rand initiated coverage of streaming media play Roku (ROKU) with a Buy rating and a $185 price target. Roku stock hasn't hit $185 just yet, but it is up 10% since that initiation so -- so far, so good.
Yesterday, Wednesday, the analyst did his best to keep that momentum going, releasing a follow-up report sketching out findings from a survey conducted by Deutsche Bank Data Innovation Group (dbDIG) -- a survey that by and large supports the analyst's initial hunch that Roku stock is a 'buy.'
What did Deutsche's survey discover? First and foremost, it confirmed what most of us already assumed: Roku remains the market leader in over-the-top (OTT) streaming devices, or as Deutsche calls them "connected TV" (CTV).
Connected TV devices, which include both OTT "boxes" such as Roku's "Express," "Ultra," "Premiere" units, as well as its streaming "Sticks," Apple's Apple TV, Amazon's Fire TV, and also "smart television" sets that incorporate software from the OTT companies directly into the TV set, are starting to overtake paid cable TV services in popularity, especially among younger consumers. According to dbDIG data, whereas in the market at large, 52% of survey participants say they pay for a cable package, and only 35% use CTV in some form, within the specific 18-34 age group, CTV ownership holds steady at 35% -- but only 34% of members of this age group pay for cable TV packages.
Likely, this has something to do with younger consumers having less income to dispose of -- so they need to dispose of it more wisely. But it also appears that consumers like their OTT devices. Cable companies such as Comcast regularly rank among the "most hated" and "worst" companies in America according to consumer satisfaction surveys. But as dbDIG discovered, 54% of survey participants rate Roku devices "6" out of 10 or higher, the best score of any of the three most popular OTT device-makers.
Incidentally, in order, those three most popular OTT device makers are No. 3 Apple, No. 2 Amazon, and ... No. 1 Roku. 43% of consumers surveyed said they own at least one Roku, eight points higher than the number who say they own an Amazon Fire device (35%), and eight more points above Apple TV (27%), leading Deutsche Bank to conclude that Roku remains far and away the "market leader" in CTV.
Now, you might think that with so many people already owning OTT devices, there's little room left to grow in this market -- but think again. First off, take another look at those numbers up above: 43% + 35% + 27% = more than 100%. That may not seem to make sense until you understand that some consumers own more than one Roku OTT device, while others may own more than one kind of OTT device.
Additionally, Rand believes that the entire penetration of all OTT devices into the consumer market is still only in the mid-30% range. If that's the case, then not only might the OTT market not yet be saturated. There may actually be room for ownership to triple off of today's levels -- and there may be room for Roku stock to keep rising as well.
Among Rand's colleagues, ROKU has a Moderate Buy consensus rating, based on 11 Buys, 6 Holds and 2 Sells. However, with an average price target of $161, the analysts think the stock is liable to remain range bound for now. (See ROKU stock-price forecast on TipRanks)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
This article was originally posted on TipRanks.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.