Wall Street Analysts Think Roku (ROKU) Is a Good Investment: Is It?

Core Viewpoint - The article discusses the reliability of brokerage recommendations, particularly focusing on Roku (ROKU), and emphasizes the importance of using these recommendations in conjunction with other research tools like the Zacks Rank to make informed investment decisions [1][4]. Group 1: Brokerage Recommendations for Roku - Roku has an average brokerage recommendation (ABR) of 1.97, indicating a position between Strong Buy and Buy, based on recommendations from 27 brokerage firms [2]. - Out of the 27 recommendations, 14 are classified as Strong Buy, accounting for 51.9%, while one is classified as Buy, making up 3.7% of the total [2]. Group 2: Limitations of Brokerage Recommendations - Solely relying on brokerage recommendations for investment decisions may not be advisable, as studies indicate they often fail to guide investors effectively towards stocks with high price appreciation potential [4]. - Brokerage firms tend to exhibit a positive bias in their ratings due to vested interests, leading to a disproportionate number of Strong Buy recommendations compared to Strong Sell recommendations [5][9]. Group 3: Zacks Rank as a Reliable Indicator - The Zacks Rank, which classifies stocks into five groups based on earnings estimate revisions, is presented as a more reliable indicator of near-term price performance compared to ABR [7][10]. - The Zacks Rank is updated more frequently and reflects changes in earnings estimates promptly, making it a timely tool for predicting future price movements [11]. Group 4: Earnings Estimate Revisions for Roku - The Zacks Consensus Estimate for Roku has increased by 12.1% over the past month to -$0.27, indicating growing optimism among analysts regarding the company's earnings prospects [12]. - This increase in consensus estimates, along with other factors, has resulted in a Zacks Rank 2 (Buy) for Roku, suggesting a positive outlook for the stock [13].