Roku Has 'War Time' CEO? Analyst Says Yes And Sees More New Positives For The Company

Needham analyst Laura Martin reiterated a Buy rating on the shares of Hooker Furnishings Corp HOFT with a price forecast of $120.00.

Roku has three revenue streams: hardware, advertising, and subscription revenue shares, said the analyst.

Subscription revenue shares are considered a key growth driver for Roku’s revenue and valuation in the next two years. The analyst estimated that revenue shares from SVOD streaming services accounted for 48% of Roku’s total reported Platform Segment revenues in 2024.

Subscription revenue shares provide stable, annuity-like income, with software contributing over 85% in 2024.

Roku’s DSP integrations were a key investment positive in the first-quarter 2025, with platforms like The Trade Desk, Google DV360, Yahoo, and Adobe already integrated. Amazon, Viant, and others are working on integrations, noted the analyst.

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These partnerships should boost revenue growth, as Roku sells 50% of its ad units. DSPs take 15% of brand spending, and with Roku’s fixed costs, incremental margins from DSP demand exceed 80%.

These integrations expand Roku’s total addressable market by attracting new advertisers.

Investors are optimistic about Roku’s home screen as a revenue driver, though it lags behind Vizio’s model.

While the home page holds major revenue potential, Roku’s current execution is considered suboptimal, offering room for growth.

Roku’s growth potential is bolstered by its expansion into small and medium-sized businesses (SMBs) and its emerging Retail Media Network (RMN) capabilities.

The Roku Channel (TRC) is expected to drive revenue growth in 2025, with February 2025 data showing TRC accounted for 2.1% of total U.S. streaming hours and experienced an 89% increase in viewership.

This is much higher than its competitors like Prime, Pluto, and YouTube. Additionally, there’s potential for ad revenue per home to grow significantly, narrowing the gap with linear TV.

Roku’s return on invested capital (ROIC) is also expected to improve, with cash from operations projected to double in 2025 and continue growing through 2026. This increase in asset productivity is likely to boost Roku’s share price, said the analyst.

Roku faces ongoing challenges in competing with big tech companies like Google, Meta, and Amazon in the advertising space.

Meanwhile, its continued growth despite heavy competition suggests it will keep expanding. The company’s venture into TV manufacturing has raised concerns about device margins and free cash flow, but these concerns are more sentiment-driven, as TV sales make up a small portion of Roku’s total revenue, concluded the analyst.

Price Action: ROKU shares traded higher by 2.01% at $79.87 at last check Monday.

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