The investment firm affirmed Roku's overweight rating while increasing its price target from $275.
"Streaming behaviors for the 2015-2019 period were largely driven by content on [subscription video on demand] (for example, Netflix, (NFLX) - Get Report Amazon Prime, (AMZN) - Get Report Disney+ (DIS) - Get Report) and YouTube, (GOOGL) - Get Report whereas 2020 and beyond suggests a big push into monetizable [advertising video on demand]," analyst Steve Cahall said.
Wells Fargo estimates that active Roku accounts spent 3.7 hours a day on the platform, translating to about $1.79 in monthly ad average revenue per user. For 2021, the firm's base case expects viewing time to grow 10% to 12%.
The firm also says valuing Roku is "more art than science," but the reports that Roku could purchase the content from the defunct Quibi digital television network strengthen its bullish stance.
"We do think there is a lot of operating leverage upside surprise likely to carry Roku’s momentum forward. A deal for Quibi content is supportive of better ARPU growth," Cahall said.
The Wall Street Journal reported on Monday that Roku was in advanced talks to buy Quibi's content catalog as the short-form streaming service wound down its operations.
Under the terms the companies have discussed, Roku would acquire rights to Quibi’s library, people familiar with the matter told the Journal.
Roku shares at last check rose 3.6% to $329.33. The stock is off about 9% from its 52-week high above $363, set in late December.