Wedbush: Buy The Dip In Roku

The recent pullback in Roku Inc ROKU from nearly $80 per share in early October to around $55 is "overdone" and should be taken advantage of by investors, according to Wedbush.

The Analyst

Wedbush's Michael Pachter upgraded Roku from Neutral to Outperform with a price target lowered from $73 to $65.

The Thesis

The recent weakness in Roku stock comes at a time when the company continues to not only operate an "exceptional platform," but expand rapidly within the smart TV category, Pachter said in the upgrade note. (See his track record here.) 

Roku is earning the reputation of being a best-in-class venue for advertisers looking for exposure within over the top streaming video, the analyst said. 

The company has a significant opportunity ahead in international expansion of The Roku Channel, which is in its early days, Pachter said. The Roku Channel is the fastest-growing contributor to the company's total revenue growth and average revenue per user growth, he said. 

Roku is scheduled to report third-quarter results Nov. 7 after market close. Pachter is expecting the company to report revenue of $176 million, which is above management's guidance range of $164 to $172 million.

Wedbush is modeling for Roku to report an adjusted EBITDA loss of $2 million, which is also better than management's guidance of an adjusted EBITDA loss of $3 million to $8 million.

Roku shares offer investors exposure to a "powerful growth story," and Wedbush's revised $65 price target is based on a more conservative 27 times P/E multiple — down from 30 times — on 2025 EPS estimates.

Price Action

Roku shares were down 0.50 percent at $55.32 at the time of publication Thursday. 

Related Links:

Roku Is A Streaming Leader With Shares 'Priced To Perfection,' Wedbush Says In Initiation

Strong Growth Projections For Roku Lead RBC To Recommend Buying The Dip

Photo courtesy of Roku.