Benzinga - Connected television and streaming platform company Roku Inc (NASDAQ: ROKU) beat revenue and earnings per share estimates in the fourth quarter. Here’s a look at what analysts are saying about the report and the company’s path moving forward.
The Roku Analysts
- Benchmark analyst Daniel Kurnos has a Buy rating and raises the price target from $63 to $89.
- Stephens analyst Nicholas Zangler has an Overweight rating and a price target of $70.
- Oppenheimer analyst Jason Helfstein has an Outperform rating and raises the price target from $75 to $85.
- Raymond James analyst Aaron Kessler has a Market Perform rating and no price target.
- Rosenblatt analyst Barton Crockett has a Neutral rating and raises the price target from $44 to $76.
- Needham analyst Laura Martin has a Buy rating and raises the price target from $65 to $80.
- KeyBanc analyst Justin Patterson has an Overweight rating and a price target of $72.
Benchmark: Kurnos said Roku crushed fourth quarter expectations and provided a first quarter outlook that could have some skepticism.
“We can understand why many of our peers reacted with open skepticism, which we think highlights how far out of favor Roku has fallen,” Kurnos said.
The analyst said it’s hard to argue that Roku didn’t gain market share in the fourth quarter and could have a chance to gain more in the future.
“Roku has a chance, in our view, to prove that they have substantially more value in the ecosystem than most give them credit for.”
Stephens: Zangler called the fourth quarter results a significant beat by Roku.
“Roku continues to insulate consumers from price increases with the intent of driving increased users to the platform,” Zangler said.
The analyst also noted that the Roku OS came embedded on 38% of all TVs sold in the U.S. in the fourth quarter and on 30% of TVs sold in Canada and Mexico.
Oppenheimer: Helfstein expects Roku to focus on the preferences of the company’s largest advertisers moving forward with more of a focus on direct integrations.
“Given mgmt’s track record of conservative guidance, we think investors will look past weaker1Q revenue guidance,” Helfstein said.
Advertising strength and the success of The Roku Channel were two highlights for the analyst in the fourth quarter.
“We believe Roku can leverage its advantages in pricing and merchandising to remain the market leader in consumer-facing connected television solutions. Roku should benefit from the secular trend of advertising dollars leaving linear TV in favor of OTT platforms.”
Raymond James: Roku showed strength in accounts added and streaming hours int the fourth quarter, according to Kessler, who says first quarter guidance could be conservative from the company.
“While we remain positive on the long-term fundamentals (large TAM, market leading TV OS, international growth opportunity), we maintain our Market Perform rating as we believe overall macro headwinds remain, and we believe meaningful EBITDA profits are still a ways off,” he said.
Roku’s guidance said it would hit positive EBITDA in 2024.
Rosenblatt: Roku spooked the world in the third quarter with guidance that sales would be down 8% in the fourth quarter, but instead they were flat compared to the previous year, Crockett said.
“And guidance for modest sales declines in 1Q23 suggest that revenues can return to growth later in 2023 as comparisons ease,” he said.
The analyst said there is a “mor constructive long-term view” and assumptions the company can hit EBITDA profitability in 2024.
Needham: Martin sees the two biggest drivers for Roku as its platform revenue share and licensing its operating system with its own connected TVs.
“Roku takes a 30% to 50% share of every dollar earned on its platform, which is similar to AAPL’s iOS platform, but at a higher rev share with lower regulatory risks,” she said, comparing Roku to Apple Inc (NASDAQ: AAPL) leading iOS app store.
Televisions with Roku loaded were 38% of US smart televisions sold in the fourth quarter, which was more than Samsung and LG combined and up from the 13% in 2016, according to Martin. The analyst said Roku building its own televisions can increase the total addressable market and take increasing market share away from Samsung and LG.
“Roku is a pure-play way to invest in growth of the US over-the-top and connected TV ecosystems.”
Martin calls Roku an arms dealer in comparisons to Apple, and that it should be valued as a digital video platform like YouTube or Apple’s iOS platform.
“Like iOS, Roku takes a share of every dollar spent on its platform, with targeted ads benefiting from over $100B of content spending by SVOD services in 2022.”
KeyBanc: Patterson said commentary from Roku about expenses was encouraging and the commitment of EBITDA profitability in 2024 could be reached as a result.
“Whether the goal of EBITDA profitability signals a change in investment philosophy or is simply a byproduct of macro conditions normalizing will likely be a key investor debate going forward,” Patterson said.
ROKU Price Action: Roku shares are up 16% to $73.41 on Thursday.
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Latest Ratings for ROKU
| Feb 2022 | Morgan Stanley | Maintains | Underweight | |
| Feb 2022 | Benchmark | Maintains | Buy | |
| Feb 2022 | Guggenheim | Maintains | Buy |
View the Latest Analyst Ratings
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