Original title: looking forward to the new year in 2021, which is the better choice, Roku or Zoom? Source: American Stock Research Society

Author: Sirisha Bhogaraju

COVID-19 vaccine has arrived, which makes mankind breathe a sigh of relief. Nevertheless, the rising number of coronavirus cases is still a matter of concern. But what does all this mean for "home" stocks such as Roku, Zoom, Shopify Inc, Teladoc and Netflix? The returns on these stocks last year were impressive.

These companies experienced an expansion of their customer base when the blockade restricted mobility, although some companies like Netflix did see growth slow as restrictions relaxed and the economy reopened.

Investors are curious to know whether companies that benefited from "social segregation" last year will grow further once the positive factors triggered by the epidemic subside. Using TipRanks's stock comparison tool, we will combine Roku and Zoom to see what Wall Street thinks of the two technology stocks.

Roku (Roku)

Roku, a leading TV streaming platform, has benefited from shifting from cable or satellite services to streaming services. According to the company, about 1/3 of American households have abandoned traditional pay-TV.

In the first nine months of 2020, Roku's platform business (including advertising and subscription revenue) accounted for 71% of total revenue, with the rest coming from sales of streaming players and other devices. To further boost platform revenue, the company has been granted Quibi's global content distribution rights. Roku plans to broadcast more than 75 Quibi-produced shows and documentaries free of charge to Roku channel users through an advertising-supported model.

Last week, Roku announced that Roku had 51.2 million active accounts by 2020 (preliminary figures), reflecting 5.2 million new accounts in the fourth quarter (quarter-on-quarter) and about 14 million in 2020. In addition, the number of views in the fourth quarter was about 17 billion hours, compared with 58.7 billion hours in 2020, which means that the number of views in both periods increased by 55 per cent year-on-year.

Both key indicators reported by Roku exceeded expectations, reflecting further improvements compared with 2.9 million new active accounts and 54 per cent growth in streaming time in the third quarter. Overall, revenue surged 73 per cent to $452 million in the third quarter, while profits unexpectedly reached $0.09, while analysts had expected a loss.

For Laura Martin, an analyst at Needham, Roku's preliminary fourth-quarter figures made it clear that the company had "won the streaming war in the United States". Martin believes that Roku will continue to grab more market share this year with its focus on connected TV, platform competitive advantage and impressive execution.

The five-star analyst believes that as the economy and advertising spending recover, Roku's advertising revenue this year will benefit from a larger installation base. Martin also expects revenue growth from the accelerated adoption of Roku streaming devices.

In line with her optimism about Roku, Martin raised the target price for Roku to $400 from $315 and reiterated her buy rating.

Mark Zgutowicz, an analyst at Rosenblatt Securities, sharply raised the target price for Roku to $420 from $260, based on ARPU (average revenue per user) trends and international earnings potential.

Speaking of the company's ARPU, Zgutowicz said: "considering that the viewing time of Roku video ads is much longer than ordinary digital ads, its relative pricing will bring considerablePremium。”

Overall, based on 12 buys, 6 holds and 1 sell, Roku's consensus rating is moderate, with an average target price of $301.79, but its shares are now under 24.4% downward pressure from the average target price because of a rapid rise of about 211% over the past year.

Zoom (ZM)

During the pandemic, as enterprises adopted remote work and educational institutions accepted virtual learning, Zoom became the preferred video conferencing platform.

The company achieved epic growth in the first three quarters of fiscal 2021. In the third quarter, Zoom's revenue surged 367% to $777 million, an adjustedEarnings per shareIt rose sharply to $0.99 from $0.09 in the same period last year.

The key indicators of Zoom clearly reflect its expanding scope of business. At the end of the third quarter, the company had 433700 customers with more than 10 employees, up 485 per cent from a year earlier. In addition, the number of customers who contributed more than $100000 in revenue increased by 136% to 1289 in the past 12 months.

Zoom expects its growth rate to be 314% at the end of fiscal year 2021, but the company says its gross margin may continue to be under pressure because of the higher proportion of free users.

At the same time, the company is expanding its product range and sees huge opportunities for Zoom phones and OnZoom, an online event platform.

Last month, The Information quoted two people familiar with the matter as saying that Zoom has begun developing an online email service and may launch an early version of the product to some customers in 2021. The report also mentioned that the company is working on developing a calendar application.

Rishi Jaluria, an analyst at D. A. Davidson, called Information's report on Zoom's launch of email "very reasonable." "We are seeing a convergence of workplace communication tools, and it makes sense for Zoom to add email and real-time messaging to its existing platform," Jaluria said in a report to investors.

The analyst believes that Zoom is "actively investing in new growth opportunities, rather than being complacent about the current record growth." Jaluria also points out that Zoom has $1.9 billion in net cash that can be used to acquire companies and enter or expand new areas.

Jaluria said Zoom would remain one of his favorites by 2021 and reiterated its buy rating with a target price of $600.

Other Wall Street investors seem to be divided on the stock, with 11 buying, 12 holding and 1 selling, with a consensus rating of moderate buy by analysts, with an average target price of $485.68. Overall, although the stock has soared 378% over the past year, it still has about 39% upside potential above the average target price.

Conclusion

Despite Roku's moat and rapid growth prospects in streaming TV platforms, Wall Street believes the stock has come to an end. Even the highest target price obtained by Roku shows modest upward potential of 5.2 per cent. Zoom Video's growth prospects are also attractive to many analysts, despite concerns about the impact of "going back to work" after the epidemic recedes. At present, based on its attractive upside potential, Zoom stocks seem to be a better choice.

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