3 Roku Analysts Recap 'Stellar' Q3

Streaming video hardware and software company Roku Inc ROKU reported third-quarter results Thursday that several analysts are applauding, with no signs of a slowdown in Roku's momentum. 

The Roku Analysts: BofA Securities analyst Ruplu Bhattacharya maintains a Buy rating on Roku's stock with a price target lifted from $245 to $260.

Rosenblatt Securities analyst Mark Zgutowicz maintains a Buy rating on Roku's stock with a price target lifted from $195 to $260.

Needham analyst Laura Martin maintains a Buy rating on Roku's stock with a $255 price target.

Related Link: Roku's 90% Video Advertising Growth Powers Company To Huge Q3 Revenue Beat

BofA On Roku's 'Stellar' Quarter: Roku's "stellar" quarter was highlighted by "unexpectedly strong" 73% year-over-year revenue growth, as the company benefited from strong sales of players and its platform, Bhattacharya said in a note.

Encouragingly, the driver of growth in the quarter "remains intact," as the move to over-the-top media consumption is a secular trend, the analyst said.

As the streaming video market continues to grow over years, Roku is well-positioned to take advantage of its leading market share, Bhattacharya said.

The company's first-party proprietary viewership data will give management a competitive advantage, as it can offer new products to advertisers such as incremental reach guarantees, according to BofA. 

Rosenblatt's Key Takeaways On Roku: Three key takeaways from Roku's earnings report caught Rosenblatt's attention, Zgutowicz said in a note.

First, concerns related to ASC 606 accounting rules are overblown, the analyst said.

As a reminder, ASC 606 requires a company like Roku to "consider any anticipated deal outperformance and subsequent changes in contract value with the contract period," he said. 

Yet the company's momentum throughout the COVID-19 pandemic resulted in outperforming customer acquisition targets, so it must "true-up to the contract values" within three to six months, Zgutowicz said.

"The perhaps irony here is the fact that these gains reflect Roku's outperformance of negotiated contracts." 

Second, Roku's management confirmed consumer packaged goods was its fastest-growing vertical, and advertisers are seeing big returns, the analyst said. For example, Snyder's of Hanover saw a 250% return on its ad spend.

Third, Roku's management discussed its OneView ad platform during the conference call and said it is driving more advertiser demand, including a "doubling of new advertisers" and "significant media spend," according to Rosenblatt. 

Needham Recaps Roku Earnings Call: The Roku earnings call included six key takeaways, Martin said in a note:

• Recurring subscriber revenue share fees will reach $250 million in 2020 and signal the company is building a dual-revenue stream business model that bodes well for a multiple expansion.
• Roku's CPMs of $30 are unchanged and the company sells zero of its owned ad inventory through programmatic ad platforms other than its fully owned DataXu.
• The DataXu acquisition is "the cornerstone" of its OneView platform, and it is adding revenue to Roku through an ad unit that promises incremental audience reach, among other factors.
• Roku can offer advertisers metrics beyond just the "single currency" of measurement.
• The Roku Channel doubled its reach year-over-year to 54 million, and this implies 23 million homes are watching TRC at least once a month.
• Roku's 100% logged-in first party data is becoming more valuable as cookies and device IDs go away.

ROKU Price Action: Shares of Roku hit a new all-time high Friday and were trading 13.24% higher at $254.86 at last check. 

Courtesy photo.