Roku (NASDAQ:ROKU) was lifted to Neutral from Sell by Seaport Research Partners, withdrawing its $75 price target for the stock.
In the note, analysts pointed to the research firm's advertising channel checks. "We are increasing our ROKU 4Q23E ad revenue estimates to +12.5% from +9.1%," the analysts wrote.
"Our support for these increases comes from channel checks with digital ad buyers over the past month+," they added. "In our channel checks, we have found that digital ad buyers (focused on allocating their clients' ad budgets and campaigns) for a range of industry verticals and ad budget/portfolio sizes, were spending in the mid-to high-teens% inside the AVOD and CTV space, while their spending on ROKU (given its more mature status within the industry) was perhaps a few hundred basis points less of growth."
Seaport has indications that ROKU has one of the stronger demand profiles among the streamers/CTV providers due to the content volume mix and pricing, and that they are possibly maximizing their inventory better than other peers, which is possibly due in part to lower pricing.
"While we are not enthusiastic about the valuation at this level (2.6x '24E Revenue, with Adj. EBITDA turning positive in 2024), we think that barring a broader-market drawdown, shares may now be within a more reasonable trading range," the analysts concluded.
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