Cathie Wood's Ark Invest recommends buying 1 top growth stock before it soars 1,540%.

Cathie Wood is Ark Invest's chief investment officer, a disruptive innovation asset manager. The business manages streaming media, digital advertising, and mobile application ETFs. Ark's fourth largest fund position, Roku (NASDAQ: ROKU), accounts for 5.6% of its invested assets. Wood and her team's value model predicts a 1,540% increase to $1,493 per share by 2026.

Leading TV streaming platform Roku Roku leads U.S., Canadian, and Mexican TV streaming by watching time. It held 53% of North American connected TV (CTV) devices in the third quarter, while Samsung, Amazon, and Apple collectively had 34%. In 2023, Roku OS was the best-selling TV OS in the U.S. and Mexico, demonstrating brand authority.

Roku engages viewers better than other streaming platforms, making it a vital partner for content providers and marketers. Roku profits from both streaming ecosystems. It monetizes subscription content with transaction fees and ad-supported content by taking a part of publisher advertising inventory and supplying media buyers with ad tech services.

The Roku Channel, an ad-supported streaming service, delivers licensed, original, and live TV. Sales of ad inventory monetize that free service, which is popular. The Roku Channel has 1% of September TV watching. This is somewhat less than Warner Bros. Discovery's Max at 1.2% and higher than Paramount+ at 0.9%.

As streaming video grows more popular, Roku does well, and the ad-supported ecosystem is projected to develop fast. Grand View Research expects a 14% yearly rise in ad tech spending until 2030. Insider Intelligence predicts 15% yearly growth in U.S. CTV ad expenditure through 2027.

CTV ads will make up 44% of TV ad expenditure even then, therefore the market will be young. Ark Invest produced a Roku value model in June 2022 with three price trajectories through 2026. Bear scenario: $100 per share, a 10% increase from current price. The basic scenario values the stock at $605, representing 565% upside. The bull scenario puts the stock at $1,493, representing 1,540% upside.

Ark believes Roku, the biggest streaming platform in the U.S., Canada, and Mexico, is "poised to become the dominant purpose-built TV operating system connecting consumers, content providers, and advertisers." Ark calculates three price projections based on engagement and monetization assumptions. The revenue increase anticipated by each price objective follows.

Bear scenario: Ark forecasts $3.6 billion in sales by 2026, assuming 2% annual growth. Base scenario: Ark forecasts $14.4 billion in sales by 2026, assuming 56% annual growth. Bull scenario: Ark forecasts $32.1 billion in sales by 2026, assuming 100% annual growth. I think the reality is between bear and base. Roku's streaming media market share should sustain above-average growth as more ad dollars flow from legacy TV to CTV.

That puts Roku on track for 15%–20% yearly sales growth over the decade. The base and bull scenarios look excessively aggressive, while the bear scenario seems too conservative.