Is Roku Stock a Buy Right Now? This Is What You Need to Know

The market has proven itself difficult to predict at the best of times, yet the sustained rally since mid-March has left many perplexed. As the bad news on Main Street Read More... The post Is Roku Stock a Buy Right Now? This Is What You Need to Know appeared first on TipRanks Financial Blog.

Is Roku Stock a Buy Right Now? This Is What You Need to Know

The market has proven itself difficult to predict at the best of times, yet the sustained rally since mid-March has left many perplexed. As the bad news on Main Street has kept piling up, Wall Street has nonchalantly marched on, seemingly oblivious to the pandemic’s destructive effect and buoyed by the stimulus measures.

But perplexing market moves are nothing new. Which brings us to Roku (). The OTT leader delivered a solid quarterly report last week, and promptly tanked in the market, as shares dropped by 8% in Friday’s session.

At first glance, this may seem odd. Roku reported revenue of $321 million, up by 55.3% year-over-year and beating the estimates by $11.77million. Q1 GAAP EPS of -$0.45 met Street expectations, while active accounts increased year-over-year by 36.8% to 39.8 million. Unsurprisingly, in these stay at home times, engagement soared to 13.2 billion hours, up by 49% compared to the same period last year.

So where was the problem? Maybe problem is the wrong word. But you could argue the good news was already priced in, as Roku announced preliminary results in mid-April, and therefore Wall Street knew what was coming. Secondly, it should be noted Roku stock has exploded since the mid-March lows. The majority of the market has surged too, but not many increased by 115% since then, so, it is possible some trading profits were locked in.

Another explanation for the sell-off might be down to Roku’s assertion that ad spend – a major ARPU (average revenue per user) growth driver - is expected to be slashed amid the economic uncertainty. The trend was already in place in the quarter as ad cancellations came in fast and furious during late March through mid-April.

Nevertheless, the pullback hasn’t dampened Rosenblatt analyst Mark Zgutowicz’ views on Roku’s prospects. As it happens, following the earnings report, the 5-star analyst reiterated a Buy and increased the price target from $110 to $145. Expect upside of 23%, should the target be met in the months ahead. (To watch Zgutowicz’ track record, )

Zgutowicz commented, “While macro and subsequent ad market uncertainties look to be with us for some time, we remain focused on long-term potential silver linings to pandemic disruptions, including ecommerce and OTT video. Roku’s dominant US brand/household positioning in OTT, and early innings globally, make it hard to bet against, even with acknowledged less than perfect financial model transparencies. OTT video streaming and importantly Roku’s market position, should come out the other end of this stronger.”

All in all, the Street keeps a positive, though more measured view. 7 Buys, 4 Holds and 2 Sells coalesce to a Moderate Buy consensus rating. The average price target is $128.33 and implies miniscule upside of 9%. (See Roku stock analysis on TipRanks)

Read more:

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Nvidia (NVDA) Stock Will Keep Growing, Says Merrill lynch

Nvidia (NVDA) stock has been on the rampage since the turn of the year, barely pausing to take a break. The macro environment and stay-at-home measures have played to Nvidia’s Read More... The post Nvidia (NVDA) Stock Will Keep Growing, Says Merrill lynch appeared first on TipRanks Financial Blog.

Nvidia (NVDA) Stock Will Keep Growing, Says Merrill lynch

Nvidia () stock has been on the rampage since the turn of the year, barely pausing to take a break. The macro environment and stay-at-home measures have played to Nvidia’s strengths, and with year-to-date gains of a 35%, expectations are high heading into next Thursday's earnings.

According to 5-star Merrill lynch analyst Vivek Arya, the company’s recent acquisitions will “add new growth legs,” to its already wide-reaching limbs.

Last week, following Chinese regulatory approval, Nvidia finally closed the long awaited Mellanox acquisition – paying $6.9 billion for the Israeli data center specialist.

“Mellanox’s networking capabilities (Spectrum5 switch), and its dominant 59% share in supercomputing connectivity (Infinband) also well complement NVDA’s recent forays into 5G edge compute, and supercomputing/HPC acceleration,” Arya noted.

Last week was a busy one at Nvidia HQ, as the company announced it planned to add another name to the family. The company intends to acquire Cumulus – a provider of open source network tools. Arya believes that, together, the new additions could provide 10% accretion in the near term (FY22/CY21E). But, looking further ahead, the new purchases could potentially increase data center sales from the current 30-35% up to 45-50% of Nvidia’s total revenue, eventually pushing CY22/23 pf-EPS to the $15 region.

Moreover, the additions should further increase Nvidia’s data center market share, moving it closer to becoming a “compute & networking powerhouse.”

Arya said, “While the company has been a pioneer and leader in acceleration processing layer, Mellanox (networking, data pre-processing via smart network interface-cards or NICs) and Cumulus (Linux-based open source networking tools) add critical/timely complementary capabilities, potentially challenging leaders Broadcom, Intel and traditional hardware and networking OEMs.”

Accordingly, Arya reiterated a Buy rating on NVDA shares, along with a price objective of $360. Investors could be pocketing gains in the shape of 16%, should the target be met over the next 12 months. (To watch Arya’s track record, )

Looking at the consensus breakdown, Nvidia’s Strong Buy consensus rating is based on 26 Buys, 4 Holds and 1 Sell. Interestingly, though, the average price target of $317.57, represents a modest upside of 2%. Nvidia’s share gains appears to have caught the Street off guard, so expect some analysts to revise their Nvidia models in the near term. (See Nvidia stock analysis 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.

The post Nvidia (NVDA) Stock Will Keep Growing, Says Merrill lynch appeared first on TipRanks Financial Blog.

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