Despite Advertising Slowdown, Analyst Expects Q4 As Roku's Inflection Point with Positive EBITDA Outlook

Wedbush analyst Alicia Reese reiterated Roku Inc ROKU with an Outperform and a $80 price target. The re-rating reflected long-term global growth and significant leverage in Roku's business model.

Roku's new products and features will likely drive user growth and provide some insulation against unfavorable macroeconomic trends.

The weak advertising market has pressured Average Revenue Per User (ARPU), but Roku's share gains in the digital connected TV (CTV) space continue.

Roku is poised to return to meaningful profitability as a platform and FAST channel leader, with an inflection point expected by year-end.

The company's commitment to curtail spending and improve expense management will likely result in higher revenue growth and consistent earnings growth.

Roku's Q2 revenue is likely to be $770 million, slightly below the consensus estimate of $773 million but in line with the company's guidance of $770 million.

The estimated adjusted EBITDA for Q2 is $(74) million, which is slightly better than the consensus estimate of $(76) million and within the company's guidance of $(75) million.

Q2 earnings per share (EPS) are likely to be $(1.25), which is slightly better than the consensus estimate of $(1.27).

Roku's active accounts for Q2 are estimated to be 72.7 million, showing a 1.5% quarter-on-quarter increase and a 15% year-on-year increase.

The TTM (Trailing Twelve Months) ARPU (Average Revenue Per User) for Q2 is likely $39.86, showing a 2% quarter-on-quarter decrease and a 10% year-on-year decrease.

Q2 platform gross margin is estimated to be 52.3%, down 370 basis points (bps) year-on-year due to softness in Media & Entertainment ad spend, replaced by lower-margin video ads.

Device revenue will likely increase by 10% in Q2, with a gross margin of (15)%, as Roku sells devices at a loss to drive active account growth.

Price Action: ROKU shares traded higher by 0.88% at $78.24 on the last check Friday.

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.