Cathie Wood's Ark Expects Roku Stock To Soar About 550% In 4 Years

Shares of streaming device maker Roku, Inc. (NASDAQ: ROKU) could be in for a strong upside over the next five years, according to analysts from Cathie Wood's Ark Invest.

Roku's shares will climb to $605 by 2026, a compounded annual growth rate of 53%, analysts led by Nicholas Grous said in a Thursday note.

The base-case price target represents a 547% increase from Roku's current levels.

The bear- and bull-case price targets are at $100 and $1,493, respectively, Grous said.

Ark Invest expects video advertising to be the most significant contributor to Roku's growth during the next five years, with display advertising, content distribution, and player pitching in with meaningful revenue. Under the bull-case scenario, the firm expects the company's revenue to increase at a 63% rate to $32 billion by 2026.

The four most important drivers used by Ark in its model are active accounts, daily hours streamed on Roku, percent of hours streamed on ad-supported video-on-demand platforms, and gross and net platform monetization rates.

Related Link: 3 Reasons Why This Analyst Thinks A Netflix-Roku Deal Will Not Materialize

Ark's open-source model excluded contributions from Roku Pay and Direct Commerce, which could become meaningful to the company's business model, Grous said.

Ark holds Roku in two of its actively-managed ETFs — its flagship ARK Innovation ETF (NYSE: ARKK) and the ARK Next Generation Internet ETF (NYSE: ARKW).

Roku is the third biggest holding of the ARKK, accounting for 8% of the fund. In the ARKW, the company's weighting is 8.71% and it is the second-biggest holding after Zoom Video Communications, Inc. (NASDAQ: ZM).

Price Action: Roku shares traded 1.5% higher at $94.97 on Friday, according to Benzinga Pro data.