On Thursday, Rosenblatt Securities adjusted its price target for Roku Inc. (NASDAQ:ROKU), increasing it to $86 from the previous $61, while maintaining a Neutral stance on the stock. The adjustment comes in the wake of Roku's third-quarter 2024 performance, which exceeded the company's forecasts.
Roku's third-quarter results were notably stronger than expected, prompting the firm to anticipate a more normalized yet healthy growth trajectory for the fourth quarter of 2024 and into 2025.
The revised price target represents a $25 increase and is based on a 33 times forward enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) multiple. This valuation is supported by an estimated compound annual growth rate (CAGR) of 33% for EBITDA from 2024 to 2026.
The firm's report highlighted that while it retains a Neutral rating on Roku, the improved cash flow estimates for 2024 and 2025 have led to the higher price target. The analyst believes that Roku is well-positioned to benefit from the increasing trend of connected TV usage.
Despite the positive outlook on the company's positioning in the market, Rosenblatt Securities suggests that the current share price already reflects the company's growth prospects. The firm's stance indicates a view that Roku's market potential is adequately priced into the stock at the current levels.
In other recent news, Roku Inc. has experienced noteworthy developments. The company's Q3 revenue reached $1.06 billion, surpassing analysts' average estimate of $1.02 billion. This increase in revenue is attributed to a significant boost in ad sales, highlighting Roku's strategic focus on advertising as a key revenue driver.
Despite a successful Q3 performance, Roku's Q4 guidance of $1.14 billion, only slightly above the consensus estimate, has led to tempered investor sentiment.
Analysts from Piper Sandler and Loop Capital have adjusted their price targets for Roku, with Piper Sandler raising it to $75 and Loop Capital to $70. Both firms have maintained a neutral stance on the stock. The analysts' notes suggest that Roku's management is effectively implementing its growth strategy, with early successes seen in the integration of the Trade Desk (NASDAQ:TTD).
Lastly, Roku has decided to cease providing household and Average Revenue Per User (ARPU) data quarterly starting in 2025, a decision that has been met with caution. These are recent developments that continue to shape Roku's position in the competitive streaming landscape.
InvestingPro Insights
Roku's recent performance and Rosenblatt Securities' revised price target align with several key metrics and insights from InvestingPro. The company's revenue growth of 16.46% over the last twelve months and 14.28% in Q2 2024 supports the analyst's expectation of a "normalized yet healthy growth trajectory."
InvestingPro Tips highlight that Roku holds more cash than debt on its balance sheet and its liquid assets exceed short-term obligations, indicating a strong financial position. This aligns with Rosenblatt's improved cash flow estimates for 2024 and 2025, which contributed to the higher price target.
However, it's worth noting that Roku is not currently profitable, with a negative operating income margin of -7.01% over the last twelve months. This is consistent with the InvestingPro Tip that analysts do not anticipate the company will be profitable this year.
The stock's volatility and strong return over the last three months, as mentioned in the InvestingPro Tips, reflect the market's reaction to Roku's better-than-expected performance and future potential in the connected TV market.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips for Roku, providing a deeper understanding of the company's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.