- Analysts highlighted concerns clouding Roku, Inc's ROKU prospects in the current environment.
- Raymond James analyst Aaron Kessler initiated coverage of Roku with a Market Perform rating and no price target.
- He expressed optimism over Roku's fundamentals citing that connected TV reach has surpassed linear TV, with advertising budgets expected to follow.
- Kessler noted that Roku is well positioned as the market-leading TV operating system in North America with a proven strategy to grow internationally.
- Roku's focus on the product and experience drives account and advertiser growth.
- Kessler expects long-term revenue growth driven by the shift in video ad budgets to CTV, improved advertising monetization, and account growth driven by international. He expects EBITDA margins long-term driven by gross margins and Roku's proven EBITDA margins in 2021.
- However, Kessler believes macro headwinds could impact the company's advertising business, and margins will be under pressure as the company accelerates investments.
- Wolfe Research analyst Peter Supino downgraded Roku from Peer Perform to Underperform with a $77 price target.
- The company's net subscriber additions and average revenue per user "face mounting challenges," Supino noted.
- Supino cut his 2022 net add estimates to reflect the falling conversion of hardware sales to new accounts, ongoing supply chain constraints, and inflationary pressure on consumer spending.
- Roku is in a "catch-22" between investing now to set up future global expansion and content acquisition opportunities or scaling back investments until the macro pressures abate, Supino added.
- Price Action: ROKU shares traded lower by 6.92% at $80.71 on the last check Tuesday.
- Photo via Wikimedia Commons
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