Why This Roku Analyst Is Double Upgrading The Streaming Stock

Shares of Roku Inc ROKU climbed in premarket trading on Friday, after the company reported an earnings beat.

The San Jose, California-based company is outperforming the broader advertising market, according to BofA Securities.

The Analyst: Ruplu Bhattacharya upgraded the rating for Roku from Underperform to Buy, while raising the price target from $45 to $85.

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The Thesis: Spending on advertisements across certain verticals, like restaurants, travel, CPG, and health and wellness, seems to be bottoming out, and is likely to improve through the year, Bhattacharya said in the upgrade note.

“New partnerships with media networks and DSPs can improve access to advertisers,” the analyst wrote. “Street modeling C1Q/CY23 net adds of less than 1mn & 7.2mn (these have not been this low since 2017) despite Roku now in more geographies,” he added.

Bhattacharya further said that Roku was gaining share in smart TVs and could benefit from the launch of its branded TVs to drive higher subscriber growth. “New rev streams will likely start to contribute with smart home initiatives (cameras, doorbells, etc.) and shoppable ads,” he added.

ROKU Price Action: Shares of Roku had risen by 2.38% to $70.57 in the premarket session on Friday.