Roku Analysts Vouch for the Must-Advertise Platform, Albeit Seek Revenue Upside to Get More Constructive

Roku, Inc ROKU shares are trading lower today. Analysts slashed their price targets after the first-quarter print on Thursday.

Wedbush analyst Michael Pachter maintained Roku with an Outperform rating and lowered the price target from $80 to $75.

The reiteration reflected significant opportunities for growth in Roku’s business and its commitment to expanding profitably.

Roku reached positive annual EBITDA in 2023, one year earlier than it guided, is on a path to exceed $100 million in annual EBITDA in 2024 and should accelerate from there. Pachter noted Roku will not revert to excessive spending for long-term growth. Instead, Roku has re-focused on balancing new initiatives that result in near-term ROI with expanding FCF and tracking toward positive net income. Pachter said that Roku continues taking market share as ad dollars shift from linear to digital-connected TV (“CTV”).

Roku is also capturing an expanding share of newfront ad bookings as it adds incremental ad inventory to its platform, and it has begun to benefit from the rebound in scatter demand and pricing. Roku is also expanding beyond its OneView platform and opening up to other demand-side platforms (DSPs) to drive more advertising, Pachter noted.

Its focus on curated sports pages should also drive incremental advertising and subscription revenue in the near and long term. Pachter projected second-quarter revenue of $935 million (prior $941 million) and EBITDA of $32.9 million (prior $21.1 million).

Piper Sandler analyst Matt Farrell reiterated Roku with a Neutral and lowered the price target from $81 to $65.

Roku delivered first-quarter platform revenue and EBITDA ahead of expectations, with guidance slightly above consensus. However, Farrell noted that investors are left looking for more, as platform revenue acceleration will not be until 2025, and sales and marketing spending in the second half will weigh on EBITDA. Management has a clear strategy, focused on a three-pronged approach to accelerate platform revenue next year.

Roku sits at an exciting spot in the CTV transition, but Farrell would rather wait for revenue to inflect to get more constructive on the story. Farrell projected second-quarter revenue of $930.1 million and EBITDA of $30.8 million.

Benchmark analyst Daniel Kurnos maintained Roku with a Buy and lowered the price target from $115 to $105.

Roku remains firmly in the show-me camp, with fears of disruption from Walmart Inc WMT – VIZIO Holding Corp VZIO, Amazon.Com Inc AMZN ad-supported, and any other number of headlines continuing to outweigh what he noted is growing evidence that Roku is a must-advertise platform. Kurnos projected second-quarter revenue of $936 million and EBITDA of $31 million.

Oppenheimer analyst Jason Helfstein reiterated a Perform rating. While Helfstein remained positive on programmatic integrations, now integrated with most DSPs, revenue tailwinds lag as SVOD advertising and Media and Entertainment remain headwinds.

Helfstein projected second-quarter revenue of $935.7 million (prior $909.4 million) and adjusted EBITDA of $30.1 million (prior $12.95 million).

JP Morgan analyst Cory A Carpenter remained Overweight-rated on Roku but lowered his price target from $100 to $90.

Roku remains a show-me story as it works through tough comps and overhangs from potential CPM compression and WMT – VZIO. Still, the analyst remained optimistic about management’s ability to re-accelerate Platform growth as 3P DSP partnerships ramp up and ad dollars increasingly shift from linear to streaming.

Carpenter projected second-quarter revenue of $935 million (prior $969 million) and adjusted EBITDA of $30 million (prior $34 million).

Price Action: ROKU shares are trading lower by 9.8% to $56.65 at the last check Friday.

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