Roku stock has already hit the optimistic target set by an analyst on Monday

Key Points
  • Needham's Laura Martin raised earnings estimates through 2020 and put a $50 stock price on Roku.
  • The stock jumped 18 percent up on Monday to $46.52, and briefly touched $50 on Tuesday.
Roku jumps price target and is being compared to Netflix

Laura Martin, an analyst covering Roku, predicted on Monday that the stock would reach $50 in the next year, which would require a 27 percent increase from Friday's close.

Just minutes into trading on Tuesday — boosted by another 7 percent jump — the stock hit her lofty target.

Roku shares surged 18 percent following Martin's report, closing on Monday at $46.52. Shares flirted with the $50 mark during morning trading Tuesday.

The company's market value has more than tripled since its IPO in September.

Martin, who covers internet and entertainment companies at Needham, raised her 12-month price target 79 percent from $28, following Roku's better-than-expected third-quarter results earlier this month. In her report, she cited the company's "strategic position," user growth, increasing revenue per user and "rising competitive moats."

None of the other three analysts with price targets tracked by FactSet have predictions for the stock above $28.

"Roku's engagement lengths are hours per day per user, well above any internet company, suggesting higher monetization potential per user," Martin wrote. She raised her earnings estimates through 2020.

Roku is known for its streaming devices, which hit the market before competitive offerings from Amazon, Google and Apple. The company has expanded its business to include advertising revenue and, more importantly, by becoming the operating system for a number of smart TV manufacturers, including RCA, Vizio, Sharp and Toshiba.

In its first earnings report as a public company, Roku generated sales of $124.8 million, topping the average analyst estimate of $110.5 million, according to a Thomson Reuters survey. The company's loss was also much narrower than analysts expected.

"Roku's competitive moats are rising as its IP gets built into more TVs under exclusive multi-year deals," Martin wrote.

It doesn't hurt that Martin's report came out on Cyber Monday. Roku's streaming sticks were deeply discounted at sites including Amazon, Wal-Mart and Best Buy.

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