Despite bullish sentiment from Needham, online investment newsletter Citron Research run by activist short seller Andrew Left, says the run in Roku is a "joke."
On Monday, analysts at Needham sent shares of Roku higher 17% after it raised its price target on Roku's stock to $50 per share, up from $28 per share. The stock continued its ascent on Tuesday, higher nearly 2.08% to $47.49 per share in afternoon trading.
Nonetheless, Needham's is bullish on Roku's valuation, strategic position within its category, active user growth, a boost in the company's average revenue per user (ARPU) and margins, and expanding competitive moats.
"Like [Netflix (NFLX) - Get Report ], we view ROKU as a pure-play on over-the-top (OTT) TV-viewing growth, but ROKU has no content risk. Recent announcements and press reports that [Disney (DIS) - Get Report ], [Alphabet (GOOGL) - Get Report ], [Amazon.com (AMZN) - Get Report ], etc. are launching new OTT services helps ROKU but hurts NFLX."
Needham argued that Netflix is the best comparison to Roku, but that Roku is materially cheaper.
And because of Roku's robust third-quarter active user and ARPU growth, coupled with increasing gross margins, Needham boosted its 2018 estimates for the company and now estimates it will break even on EBITDA one quarter before its initial expectations.
Alphabet is a holding in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells GOOGL? Learn more now.
More of What's Trending on TheStreet: