On Thursday, Benchmark maintained a Buy rating on Roku Inc. (NASDAQ:ROKU) with a stable price target of $105.00. The firm's positive stance on the company is rooted in its significant role within the Connected TV (CTV) ecosystem, as well as recent positive developments that suggest growing support for Roku's stock.
Benchmark hosted Roku at their 11th annual Technology, Media & Telecom (TMT) conference in New York, where discussions revealed a positive shift in both buy-side and sell-side sentiment. This change has been reflected in the stock's movement, which has begun to return to its previous trading range.
The analyst from Benchmark highlighted Roku's performance at the conference and noted that the company's guidance for the third quarter of 2024 was solid. Additionally, the recent upfront results, despite the emergence of two new major competitors creating substantial noise in the market, are expected to bolster the narrative around Roku's market share gains.
While Benchmark acknowledges concerns regarding the macroeconomic environment and the potential for investor expectations to become overly optimistic, the firm believes that Roku's financial clarity is aligning market perceptions. Despite the stock's recent price improvement, which has balanced the risk/reward profile, Benchmark suggests that there is still underappreciated value in Roku's long-term prospects.
In other recent news, Roku Inc. has seen a series of analyst adjustments and promising financial performance. Wells Fargo upgraded Roku's stock rating from Underweight to Equal Weight, citing an expected increase in the company's Platform revenue growth for the third and fourth quarters.
Guggenheim also upgraded Roku's stock from Neutral to Buy, based on financial estimates that surpass consensus for 2024 and 2025, and the firm's confidence in Roku's leadership and monetization strategies. In contrast, Citi reduced its price target for Roku to $60 while maintaining a Neutral rating, following the company's recent financial performance and third-quarter projections.
Roku's second quarter 2024 earnings showed a 20% year-over-year increase in streaming hours and an addition of 2 million net new streaming households. The platform revenue also rose by 11% year-over-year to $824 million. Looking ahead, Roku provided an upbeat outlook for the third quarter, projecting total net revenue of $1.01 billion, a gross profit of $440 million, and adjusted EBITDA of $45 million.
Despite facing challenges in the market, Roku remains optimistic about its revenue growth and is focused on strategic partnerships and third-party collaborations to drive monetization.
InvestingPro Insights
Recent data from InvestingPro underscores Roku Inc.'s (NASDAQ:ROKU) financial position and market performance, providing valuable context to Benchmark's optimistic outlook. Notably, Roku holds more cash than debt, suggesting a solid balance sheet, and the company's liquid assets exceed its short-term obligations, indicating good short-term financial health. This aligns with Benchmark's confidence in Roku's financial clarity.
Moreover, Roku's stock has demonstrated strong returns, with a 31.07% increase over the last month and a 24.47% rise over the last three months. This performance reflects the positive sentiment shift noted by Benchmark. However, it is important to consider that the company is not expected to be profitable this year, and it has not been profitable over the last twelve months, as reflected by a negative P/E ratio of -20.25 and an adjusted P/E ratio of -48.47 for the last twelve months as of Q1 2023.
Investors should also note that while Roku's revenue growth has been robust, with a 16.46% increase over the last twelve months, the company's stock is trading at a high EBITDA valuation multiple. This could be a point of concern for value-focused investors. For those interested in further analysis, there are additional InvestingPro Tips available, including insights on earnings revisions and stock price volatility, which can be found at https://www.investing.com/pro/ROKU.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.