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Roku: Still Priced For Disaster

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Update - Sept. 11, 2024

Roku looks ready to again hear at $70 after the Cleveland Research note. 

  • Cleveland Research said on Wednesday that third quarter results for Roku (NASDAQ:ROKU) would likely be ahead of consensus, helped by linear gains, TTD tailwinds, CPM investments and execution.
  • "3Q momentum sounds strong, driven by incremental linear TV gains, tailwinds from programmatic efforts, and solid ROKU execution on new products/initiatives—ROKU leveraging supply growth to win on price," the research firm said in their September 11 commentary.
  • Cleveland said the outlook for the streaming device company "looks more constructive," judging by its ability to compete due to new products, new advertisers gains, lower CPMs, and better agency relationships. They expect most growth to come via DSPs.
  • On TTD, Cleveland said partnership seems to be driving incremental revenue as programmatic access improves and volume growth exceeds CPM declines. On ACR data benefits, they said advertisers see runway for further expansion/tailwinds into 2025.

    • Finviz Chart

    Update - Aug. 23, 2024

    Guggenheim upgraded Roku to Buy, sets PT at $75. The stock is already up 30% from SFCs bullish call just 2 weeks ago.

    • We expect investor enthusiasm for the $ROKU story to grow into 3Q earnings in November as the company makes progress toward broadening video inventory advertising sales via third-party demand-side platforms and improved home screen monetization. This expected progress should further bolster confidence in $ROKU as a unique top-line acceleration story in 2025.
    • Our revised rating reflects 1) financial estimates ahead of consensus for 2024 and 2025, and 2) attractive relative valuation based on a 15% normalized OIBDA margin, which we believe the company will progress toward through a combination of revenue growth and cost management"

     


    Original article posted on Aug. 7

    • Roku reported strong growth due to a 20% increase in streaming hours and 14% growth in accounts.
    • The streaming video platform is set to top the $1 billion quarterly sales milestone and is targeting accelerating growth heading into 2025.
    • ROKU stock only trades at ~1x forward EV/S targets due in part to a massive cash balance.
    • Looking for a portfolio of ideas like this one? Members of Out Fox The Street get exclusive access to our subscriber-only portfolios. Learn More »
    A lot of stocks have been irrationally hit in the recent market selloff, with Roku, Inc. (NASDAQ:ROKU) down to new lows. The streaming video platform continues to report strong viewership growth, setting up a stronger future. My investment thesis is ultra-Bullish on the stock at the lows, trading at a very discounted valuation multiple.


    Read the full article on Seeking Alpha. 

    Disclosure: No position mentioned. Please review the disclaimer page for more details. 

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