Bullish Roku Analyst Weighs Coronavirus Impact, Says Platform Is 'Winning Aggregator' In Streaming


Roku Inc ROKU is likely to face a near-term hiccup but is better positioned the medium- and long-term, according to a Needham analyst. 

The Roku Analyst: Laura Martin has a Buy rating on Roku shares with a $150 price target. 

The Roku Thesis: COVID-19's negative impact on Roku will be at its worst in the second quarter, but the impact will mitigate as 2020 wears on, Martin said in a Thursday note. (See her track record here.)

Hours streamed will be strong again in the second quarter, likely rising 46% year-over-year, and year-over-year active account growth is expected to accelerate from 37% from the first quarter to 39% in the second quarter, the analyst said. 

The weak spot is likely to be large ad categories such as autos, entertainment and travel, with year-over-year growth likely slowing from 108% in the first quarter to 38% in the second quarter, she said. 

Needham lowered its 2020 revenue estimates for Roku and raised its 2021 revenue estimate.

The changes are being made on the expectation that COVID-19 will accelerate the ad spending shift toward ConnectedTV away from linear TV as consumer spending and economic growth return, Martin said. 

The firm eMarketer now estimates that brands will hold back up to $7 billion in the upfront TV market, making these ad dollars available to Roku between the fourth quarter of 2020 and the third quarter of 2021, the analyst said. 

Despite TCL launching its first Android TVs in the U.S., Martin said she expects TCL's Roku TVs to continue being the appliance company's bestselling connected TVs in the U.S.

"Roku had 45% (40mm of 88mm) of total connected TV homes in the US at 3/31/20, and therefore we believe Roku will be the winning aggregator of streaming TV and film content apps."

Roku has valuation upside from its market cap of about $14 billion, according to Needham. 

ROKU Price Action: Roku shares were up 6.29% at $124.70 at the time of publication. 

Related Link: Here's How Much Investing $1,000 In Roku's 2017 IPO Would Be Worth Today

Photo courtesy of Roku. 


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