On Thursday, Seaport Global Securities updated its outlook on Roku Inc. (NASDAQ:ROKU) stock, raising the price target to $85 from $74 while maintaining a Buy rating. The adjustment follows a report from MAGNA Global, indicating a significant uptick in the US advertising market, which is currently experiencing robust growth rates not seen in approximately two decades.
The US advertising market is projected to grow by 8.9% globally across various platforms, excluding cyclical events. MAGNA Global's quarterly US ad outlook revealed a notable 400 basis point increase in the 2024 expected growth rate for Connected TV (CTV) advertising to 19.3%, up from the previous estimate.
Seaport Global's analysis had initially set Roku's advertising growth at 10.6%, acknowledging a temporary loss in market share due to the emergence of new ad-supported streaming services. However, in light of the updated figures from MAGNA Global, the firm has revised its 2024 advertising growth estimate for Roku upward by approximately 100 basis points.
The enhanced advertising growth outlook has also led Seaport Global to increase the target revenue multiple for Roku's platform business to 2.5 times from the earlier estimate of 2.0 times for the year 2025. This revision underpins the decision to raise the price target for Roku shares to the new $85 mark, reaffirming confidence in the company's stock performance.
InvestingPro Insights
As the advertising landscape continues to evolve, Roku Inc. (NASDAQ:ROKU) appears well-positioned to capitalize on the growth trends, with Seaport Global Securities raising their price target to reflect this potential. In support of this optimistic outlook, real-time data from InvestingPro enhances our understanding of Roku's financial health and market performance. Roku holds a market capitalization of $11.19 billion, underscoring its significant presence in the industry. Despite not being profitable in the last twelve months, the company boasts a strong gross profit margin of 45.12%, indicating its ability to maintain a substantial profit on its revenue streams.
InvestingPro Tips highlight that Roku has more cash than debt on its balance sheet, suggesting financial stability and resilience. Additionally, analysts have revised their earnings upwards for the upcoming period, signaling potential confidence in Roku's future performance. With a total of 11 additional InvestingPro Tips available, investors can gain deeper insights into Roku's strategic positioning (https://www.investing.com/pro/ROKU).
Moreover, the company's stock has experienced strong returns over the last three months, with a 47.27% increase, reflecting positive investor sentiment. However, it is important to note that the stock's price movements have been quite volatile, which might be a consideration for risk-averse investors. While Roku does not pay a dividend, its recent market performance and the upward revision of earnings estimates may offer growth opportunities for shareholders.
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