Is Roku Stock Going to $80? 1 Wall Street Analyst Thinks So.

Shares of Roku (ROKU 4.10%) are down about 46% from a peak they set last year, but Wall Street’s still bullish for the streaming platform.

Susquehanna analyst Shyam Patil recently lowered his firm’s price target for Roku to $80 per share and maintained a positive rating. The reduced target still implies a gain of about 38% from recent prices.

Why Wall Street isn’t changing the channel on Roku

Roku’s been operating since 2002, but it’s still losing money. Last year, it lost a stunning $709 million.

Despite poor performance on its bottom line, Patil and his Wall Street colleagues are generally bullish for the streaming platform. That’s because its net loss narrowed to just $50.9 million in the first quarter.

If you’re willing to ignore a heap of noncash expenses, such as $94.6 million in stock-based compensation, Roku’s already profitable. Cash from operations reached $46.7 million in the first quarter. Over the past 12 months, Roku has generated $427 million in free cash flow.

A buy now?

Patil’s $80 price target isn’t unreasonable. At recent prices, the stock is trading for around 19.5 times trailing free cash flow, which is a fair price to pay for a business growing as quickly as Roku.

In the first quarter, the number of households streaming with Roku devices rose 14% year over year to 81.6 million. It hardly costs streamers anything to watch a Roku device, but the company records about $40 in revenue per user annually. With such a valuable platform, profits could roar higher.

Risk-averse investors probably want to wait until Roku can report net income according to generally accepted accounting principles (GAAP). With profitability metrics rapidly moving in the right direction, though, investors with a high tolerance for risk would do well to add some shares to their portfolio now.