Roku Investor Sentiment Decidedly Negative Into Earnings, Says Analyst

J.P. Morgan analyst Cory A Carpenter reiterated an Overweight rating on the shares of Roku Inc ROKU.

Roku is slated to report first-quarter FY24 earnings on Thursday, April 24.

There is often noise in the scatter market ahead of the Upfronts (& re-setting of prices). Still, the analyst is yet to see evidence of meaningful scatter improvement, and thus, the analyst noted that the first-quarter revenue upside is likely to mirror that of the fourth quarter (3% beat) vs. Roku’s 9% average beat from 3Q22-3Q23.

Also Read: Roku’s Analysts Are Changing Their Forecasts On The Stock – Here’s Why

The analyst noted Roku is likely to guide second-quarter Platform revenue to about 10% Y/Y (vs. 13% guide in first-quarter), with the potential for further deceleration in the third quarter.

The analyst noted the biggest opportunity to re-accelerate Platform revenue is for Roku to improve ad fill rates that are estimated to be at a historically low ~40%.

The analyst recognizes that investors are skeptical in a revenue re-acceleration into potential CPM compression and Walmart Inc WMT / Vizio Holding Corp VZIO merger.

Also See: VIZIO Faces Analyst Downgrades Amid Walmart Acquisition, Impact On Roku

While the analyst is tactically cautious about first-quarter earnings, it is prudent to remain positive on the secular growth of connected TV & Roku’s longer-term monetization opportunity. 

The catalyst path after first-quarter earnings, according to the analyst, includes Upfronts, with Roku’s presentation on April 30, WMT/VZIO regulatory updates, with the Hart-Scott-Rodino expiry on April 29, and potential FTC second request, and Roku guiding to fourth-quarter Platform revenue re-acceleration at third-quarter earnings.

Price Action: ROKU shares are trading higher by 2.04% at $58.06 at the last check Monday.

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