Roku Crushes Q2 Estimates, Sending Stock Soaring, But Ongoing Hollywood Strike Triggers Analysts' Concern

Shares of Roku Inc ROKU spiked in early trading on Friday, a day after the company reported quarterly results that crushed estimates.

The results came amid an exciting earnings season. Here are some key analyst takeaways from the earnings release.

Needham On Roku

Analyst Laura Martin maintained a Buy rating, while raising the price target from $80 to $85.

Roku reported “strong” second-quarter results, with 5% growth in operating expenses driving solid margin expansion, Martin said in a note.

The company “reiterated its promise to be EBITDA positive in 2024, primarily through cutting costs, not rev growth (which they don't control),” the analyst wrote. He added, however, that Media & Entertainment (M&E) ads, which have the highest gross margins, could decline in the second half of 2023.

KeyBanc Capital Markets On Roku

Analyst Justin Patterson reiterated a Sector Weight rating on the stock.

“Roku's recent history of beating and guiding conservatively continued, with revenue exceeding expectations by 9% but 3Q guided down q/q (atypical seasonality),” Patterson wrote in a note.

The sequential decline was “attributed to Hollywood strikes weighing on Media & Entertainment (M&E) revenue, and we expect a prolonged strike raises the range of outcomes into 4Q,” the analyst said.

Check out other analyst stock ratings.

William Blair On Roku

Analyst Ralph Schackart reaffirmed an Outperform rating.

“Cable TV package ownership is expected to continue to decline, benefiting Roku,” Schackart said. The company also gained “good traction” with new advertising mediums, he added.

With strong viewership on Roku, global streaming hours on its platform grew 21% year-over-year, the analyst stated. “Streaming hours on the Roku Channel in the second quarter expanded more than 50% year-over-year,” he added.

ROKU Price Action: Shares of Roku had jumped 22.75% to $83.70 at last check on Friday.

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