Roku Investor Sentiment Decidedly Negative Into Earnings, Says Analyst

Zinger Key Points
  • Analyst Cory A Carpenter reiterates an Overweight rating.
  • The analyst is tactically cautious about 1Q earnings.

J.P. Morgan analyst Cory A Carpenter reiterated an Overweight rating on the shares of Roku Inc ROKU.

Roku is slated to report first-quarter FY24 earnings on Thursday, April 24.

There is often noise in the scatter market ahead of the Upfronts (& re-setting of prices). Still, the analyst is yet to see evidence of meaningful scatter improvement, and thus, the analyst noted that the first-quarter revenue upside is likely to mirror that of the fourth quarter (3% beat) vs. Roku’s 9% average beat from 3Q22-3Q23.

Also ReadRoku’s Analysts Are Changing Their Forecasts On The Stock – Here’s Why

The analyst noted Roku is likely to guide second-quarter Platform revenue to about 10% Y/Y (vs. 13% guide in first-quarter), with the potential for further deceleration in the third quarter.

The analyst noted the biggest opportunity to re-accelerate Platform revenue is for Roku to improve ad fill rates that are estimated to be at a historically low ~40%.

The analyst recognizes that investors are skeptical in a revenue re-acceleration into potential CPM compression and Walmart Inc WMTVizio Holding Corp VZIO merger.

Also SeeVIZIO Faces Analyst Downgrades Amid Walmart Acquisition, Impact On Roku

While the analyst is tactically cautious about first-quarter earnings, it is prudent to remain positive on the secular growth of connected TV & Roku’s longer-term monetization opportunity. 

The catalyst path after first-quarter earnings, according to the analyst, includes Upfronts, with Roku’s presentation on April 30, WMT/VZIO regulatory updates, with the Hart-Scott-Rodino expiry on April 29, and potential FTC second request, and Roku guiding to fourth-quarter Platform revenue re-acceleration at third-quarter earnings.

Price Action: ROKU shares are trading higher by 2.04% at $58.06 at the last check Monday.

Photo via Shutterstock

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