Roku bears dismissed by Benchmark, which sees 127% upside
Benchmark is pushing back against heavy negative sentiment on $Roku Inc(ROKU.US$, reiterating its Buy rating and healthy price target following reaction to the company's second straight quarter of disappointing subscriber additions - and some channel checks on Roku's players.
"Sentiment remains extremely negative, with incremental pressure starting to come from the sell side, although we have a markedly different view on some of the information being filtered into the marketplace, especially around the outlook for media & entertainment (M&E) spend and, to a lesser extent, SVOD (subscription video on demand)," analyst Daniel Kurnos says.
Along with the $Alphabet-C(GOOG.US$ carriage dispute headed for a "cliff" on Dec. 9, it marks an "ideal setup" for the stock, "especially since our channel checks indicate a much healthier in-stock level of Roku TVs at both Walmart and Best Buy than feared, while we think a Google-Roku resolution could be in the offing even if a temporary blackout occurs."
Management's lack of visibility into its own supply chain built a "perfect storm" in Q3, with the subscriber miss creating a credibility issue, Benchmark says.
It did check on inventory of 55-inch and 65-inch Roku-supporting TVs in weighing the supply logjam, however. Only about 10% of Best Buy stores were out of stock of a particular size (but never both), backfilling stock within 7-10 days. And only 15% of Walmart stores were out of more than two particular brand/size combinations of six unique units, and 50% were out of only one or less.
Overall it feels like Spring 2020 "when bears argued that Roku would see increasing competition and decreasing leverage in (third-party) negotiations," complete with a COVID spike. While Benchmark acknowledges competition is hotter, it thinks Roku will be a share gainer with upside to net adds both domestically and abroad, "plus total platform revenue outperformance leading to a similar upwards share move."
The firm has a price target of $525, currently implying 127% upside
Roku is among the many streaming-centric companies looking to make some sales progress with Black Friday deals.
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emirsway : In that case, Roku will gain upper hand and Google will compromise on a new agreement favouring Roku.
Sze How Ng : ROKU is broku.
Brandon Loo : The key is that Whether Roku can continue sell it's hardware well without youtube on board. If yes, Roku will will be very well. Because You tube will not be doing good in advertisement without Roku's data (Google can not gat data from Amazon either). In that case, Roku will gain upper hand and Google will compromise on a new agreement favouring Roku.
areecep Brandon Loo: This is an excellent point and something I did not know about this dispute. That makes me a bit more optimistic.
Primaveraaa KRWUYB: Ridiculously expensive compared to what? Hard to talk about price if you arent comparing it to anything.
If you compare to its closest competitor Netflix, it’s not expensive at all right now.
By I’m assuming your forward growth expectations are different than that of a bull
Smart twitters : I initiated a position today.
BraveRoy : By far the best software on TVs that exists. Nothing else is close.
Google issue is overstated. There’s nothing special about YouTubeTV that you can’t replace with Hulu.
BSqueen : ROKU grossly undervalued under $250. buy, Buy, BUY!!! Longz! :-)
jedgggg : Check the market, add positions , bears should be executed, Roku Rockets!