Oppenheimer Likes Roku Channel Opportunity, Upgrades Stock

After a strong start out of the gates following its 2017 IPO, Roku Inc ROKU stock has cooled so far in 2018. However, one analyst says the next leg higher for Roku may now be on the horizon.

The Analyst

Oppenheimer analyst Jason Helfstein upgraded Roku from Perform to Outperform and set a $50 price target for the stock.

The Thesis

The Roku Channel is putting up some impressive numbers judt nine months after it was launched, Helfstein said. Oppenheimer estimates the channel accounts for about 0.63 percent of domestic time spent on Roku, or roughly a 9-million-hour monthly run rate.

Helfstein said Roku could achieve 0.82 percent of off-platform time spent share by 2023 and keep 30 percent of revenue after sharing 50 percent with content publishers and 20 percent with third-party platform operators.

“The rapid adoption of The Roku Channel gives us incremental confidence in the channel's ability to garner viewership on other platforms, such as Samsung, allowing Roku to monetize a broader portion of the OTT ecosystem than we had previously assumed was possible,” Helfstein said.

Helfstein estimates the Roku Channel alone carries a long-term value of about $7 per share.

He said Roku can take advantage of its pricing and merchandising advantages and continue to be a long-term market leader in connected TV solutions. In addition, Roku is well-positioned to capitalized on the secular flow of advertising revenue from traditional TV to over-the-top formats.

Price Action

Roku stock traded higher by 5.5 percent to $45.70 following the upgrade.

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