Roku's Analysts Are Changing Their Forecasts On The Stock - Here's Why

Zinger Key Points
  • Analyst sees Roku's recent challenges as a setup for future value, highlighting underestimated market position.
  • Wedbush adjusts Roku outlook, focusing on financial discipline and market share gains in digital TV transition.

Benchmark analyst Daniel Kurnos reiterated Roku Inc ROKU with a Buy rating and a $115 price target.

The analyst noted that Roku has had a tough couple of months since the last print, during which shares moved back rapidly and ultimately below the hypothetical $60 support level. 

Kurnos tweaked his second and third-quarter projections to align with the consensus on Platform growth. Still, he maintained his above-consensus view for the fourth quarters of 2024 and 2025, with investors clearly skeptical of the latter after all the recent commentary. 

Also Read: What's Going On With Roku Shares After Reporting Data Leak Involving 576,000 Accounts?

The analyst liked that sentiment across the board is highly damaging regarding upside share price potential, although he suspected that, even with some possible tailwinds from traditional TV budgets and incremental 3P DSP usage, near-term fundamental blowouts seem less likely. 

However, the analyst noted Roku is undervalued in the broader ecosystem and suspects that many of the competition fears are overblown.  

Kurnos projected first-quarter revenue and EPS of $851 million and $(0.82) versus Street consensus of $844 million and $(0.66).

Wedbush analyst Michael Pachter maintained Roku ROKU with an Outperform and lowered the price target from $120 to $80.

The analyst notes that Roku reached positive annual EBITDA one year earlier than its guidance and has committed to further improvement in 2024 EBITDA while expanding FCFd. 

According to Pachter, Roku has found religion in generating and expanding FCF and will not revert to excessive spending for long-term growth. 

Instead, Roku intends to balance new initiatives that result in near-term ROI with expanding FCF and tracking toward positive net income. 

He noted that Roku continues taking market share as ad dollars shift from linear to digital-connected TV.

Roku also captures an expanding share of new front ad bookings by adding incremental ad inventory to its platform. It should soon benefit from the rebound in scatter demand and pricing. 

While Pachter was previously sanguine about Roku's e-commerce opportunity, he became aware of some competitive disadvantages for Roku and its need to ramp up investment to compete in the space. 

Coupled with industrywide headwinds in media and entertainment spending, Pachter noted that Roku's focus on expanding positive EBITDA in 2024 may inhibit its ability to compete on the e-commerce front. 

Pachter expects Roku to report first-quarter revenue of $855 million and EPS of $(0.61).

Roku stock plunged over 35% year-to-date. Investors can gain exposure to the stock via ARK Next Generation Internet ETF ARKW and ARK Innovation ETF ARKK.

Price Action:  ROKU shares are trading lower by 3.07% to $56.89 on the last check Friday. 

Image credits: renata colella on Shutterstock

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