On Wednesday, Needham, a respected investment firm, maintained its optimistic stance on shares of Roku Inc. (NASDAQ:ROKU), a leading streaming platform. The firm reiterated its Buy rating and a price target of $100.00 for the company's stock. The endorsement comes as Needham fine-tuned its fiscal year 2024 estimates for Roku, while keeping its fiscal year 2025 projections unchanged and introducing estimates for fiscal year 2026.
The firm forecasts that Roku will achieve revenues of $1.01 billion in the third quarter of fiscal year 2024, marking an 11% year-over-year increase. Adjusted EBITDA is expected to reach $45.2 million, a 4% rise compared to the previous year. Platform revenues are projected to be $854.5 million, up 9% year-over-year, with a gross profit of $55.9 million, demonstrating a significant 21% increase and a 53% margin.
The analysis included adjustments within the Platform revenue segment, with Video Advertising revenues expected to grow by 8% year-over-year, a slight 1% increase from previous estimates. This is balanced by a revised forecast for Audience Development revenues, which are now expected to be up by 1% year-over-year, 4% below prior estimates.
The Devices revenue segment remains unchanged, with projections indicating a 24% year-over-year increase to $155.8 million, despite a negative gross margin of 10%.
The investment firm also predicts that Roku's active accounts will reach 84.4 million by September 30, 2024, representing an 11% increase from the previous year and a 0.8 million rise quarter-over-quarter. Furthermore, total streaming hours on the Roku platform are anticipated to hit 30.4 billion, up 14% year-over-year. These figures underscore Roku's continued growth in the competitive streaming market.
In other recent news, Roku Inc. has secured a new credit agreement with Citibank N.A., providing a revolving credit facility of up to $300 million, with an option to increase it by an additional $300 million under certain conditions. The credit facility, set to mature in 2029, will be utilized for general corporate purposes, including supporting working capital needs.
In parallel, Roku's Q2 2024 earnings revealed a 20% year-over-year increase in streaming hours, an addition of 2 million net new streaming households, and an 11% year-over-year rise in platform revenue to $824 million. Roku has also projected total net revenue of $1.01 billion for the upcoming third quarter.
In the realm of financial analysis, Roku has been the focus of several adjustments. Wells Fargo upgraded Roku's stock rating from Underweight to Equal Weight, forecasting robust growth in Roku's Platform revenue. Guggenheim also upgraded Roku's stock from Neutral to Buy, citing financial estimates surpassing consensus for 2024 and 2025.
However, Citi maintained a Neutral rating while reducing its price target for Roku, following the company's recent financial performance and Q3 projections. These recent developments underscore Roku's ongoing efforts to strengthen its position in the streaming industry through strategic partnerships and third-party collaborations.
InvestingPro Insights
As Roku Inc. (NASDAQ:ROKU) garners a positive outlook from investment firm Needham, real-time data from InvestingPro provides a more nuanced view of the company's financial health and market performance. With a market capitalization of $10.8 billion, Roku's financial metrics reveal a company that is navigating through its growth phase.
The company's revenue for the last twelve months, as of Q2 2024, stands at $3.746 billion, reflecting a solid year-over-year growth of 16.46%. This aligns with Needham's forecast of increasing revenues, suggesting that Roku is maintaining its upward trajectory.
InvestingPro Tips further inform potential investors about Roku's financial position and market dynamics. Notably, Roku holds more cash than debt on its balance sheet, indicating a degree of financial stability. Moreover, the company's liquid assets exceed short-term obligations, providing it with the flexibility to manage its liabilities effectively.
However, analysts do not anticipate Roku will be profitable this year, and the company has been trading at a high EBITDA valuation multiple, which could be a point of concern for value-focused investors. On the positive side, Roku has demonstrated strong returns over the last one and three months, with price total returns of 27.47% and 42.15%, respectively, showcasing investor confidence in the short term.
For readers seeking a deeper analysis, InvestingPro offers additional insights, including a total of 10 InvestingPro Tips for Roku, which can be found at InvestingPro Roku. These tips provide a comprehensive look at the company's performance metrics and analyst opinions, which can be invaluable for making informed investment decisions.
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