We recently compiled a list of the 10 Stocks Set to Explode in 2025. In this article, we are going to take a look at where Roku, Inc. (NASDAQ:ROKU) stands against the other stocks set to explode in 2025.
“Big Technology are The New Defensives” Strategist Says
As the Magnificent Seven continues to release earnings for the fiscal third quarter of 2024, investors are keen to see if the group can maintain their market leading position and exemplary performance. On October 25, Nancy Tengler, Laffer Tengler Investments CEO & Chief Investment Officer, appeared in an interview on Yahoo Finance to share her market thesis on big tech amid current market conditions.
Tengler suggests that names in big technology boast reliable earnings growth, fitting the basic criteria of such. She adds that she would much rather own big tech names than invest in traditional defensive stocks despite a sluggish economic backdrop. Tengler reiterates her bullish stance on the sector claiming that big technology names are the new defensive and hold much stronger positions in the market.
READ ALSO: 10 Oversold Tech Stocks To Buy Right Now and 8 Unstoppable Stocks That Could Make You Richer.
She emphasized that these names have large cash flow reserves, oftentimes, bigger than most countries. Tengler highlights that she is not bullish on all of the names in the magnificent seven and stresses that she has expanded her exposure to the tech sector, adding new stocks to her portfolio. However, at the same time, there are several names within the magnificent seven that cannot be ignored or argued against. She also suggests that investors must seek to invest and own a select few among the group, instead of owning all of them.
She shares that she was previously pessimistic about certain names she held and emphasized that she will focus on margins for certain stocks among the Mag Seven moving forward. Tengler also adds that while these companies have been criticized for pouring billions into capital expenditures, certain names are expected to benefit immensely from AI monetization and their unique cloud services and products.
While many characteristics define exploding stocks, some key traits involve an expanding customer base, improving monetization of offerings, increasing cash flows, and strong fundamentals. Biotech, electric vehicles, artificial intelligence, and cloud are among the few high-growth markets expected to blow up in the coming years. Within these sectors, certain names have been performing exceptionally well in the current market rally and are expected to outperform in 2025.
Our Methodology
To come up with 10 stocks set to explode in 2025, we consulted financial media to shortlist stocks that are expected to perform exceptionally well according to analysts and strategists. After consulting 10 similar rankings on the internet we examined the Street-High upside for each stock and picked the ones with the highest upside, as of October 27, 2024. Our list is in ascending order of the street high upside as of October 27, 2024. We have also mentioned the hedge fund sentiment for each stock.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A person at home displaying a vibrant media streaming interface, being rendered on a large flatscreen television.
Roku, Inc. (NASDAQ:ROKU)
Street High Upside as of October 27, 2024: 54%
Number of Hedge Fund Holders: 35
Roku, Inc. (NASDAQ:ROKU) is a streaming television company that ranks eighth on our list of stocks set to explode in 2025. The streaming platform connects the entire TV ecosystem around the world and is available in North America, Latin America, and parts of Europe. The company also sells TVs and owns a channel, Roku Channel, that provides consumers with free, ad-supported content.
The Roku Home Screen, the first step to its streaming experience, reaches more than 120 million people every day in the United States. In the second quarter of 2024, the company logged $969 million in revenue, up by 14% year-over-year. Of this, platform revenue was worth $824 million, up by 11% year-over-year. Streaming households totaled 83.6 million, a net increase of 2 million from Q1 2024.
Roku’s (NASDAQ:ROKU) expansion story is interesting. On October 9, the company forged a partnership with Instacart to advance its advertising partnership. The partnership promises superior targeting and offers new shoppable formats. The new ad formats are interactive allowing the grocery shopping platform to pitch personalized adverts to customers sitting at home watching television.
Roku, Inc. (NASDAQ:ROKU) is set to explode in 2025 and we say that because of its consistent growth in users and streaming households. In Q2 2024, the company achieved its fourth consecutive quarter of positive adjusted EBITDA and cash flow, reflecting its growth trajectory.
O’keefe Stevens Advisory stated the following regarding Roku, Inc. (NASDAQ:ROKU) in its first quarter 2024 investor letter:
“Roku, Inc. (NASDAQ:ROKU) – An idea that would have seemed unthinkable just a few years back when low P/E or low multiple meant the stock was cheap. Roku is free-cash-flow positive, EBITDA breakeven, and GAAP Net Income unprofitable. Historically, investors tend to shy away from unprofitable businesses. Deeming them too risky. Roku has a $2B net cash position and is reinvesting in the business, grabbing Connected TV market share. Geographic expansion takes time and capital. They have a dominant share and have many tailwinds. Walmart’s acquisition of Vizio adds to the already heightened uncertainty. We can’t remember seeing a company with such “negative” sell-side coverage. 9 buys, 10 holds, and 4 sells. Nearly all reports discuss weighting for clarity, which is why the opportunity exists. Wells Fargo has the lowest price target at $45, or 26% downside. We see a reasonable case for a $100 stock in the near term and long term, owning a compounder with an attractive business model, secular tailwinds, and dominant market share that can translate into a desirable return over the next several years.”
Overall, ROKU ranks 8th among the 10 stocks set to explode in 2025. While we acknowledge the potential of ROKU as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ROKU but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.