On Friday, Oppenheimer adjusted its stance on Roku Inc. (NASDAQ:ROKU), downgrading the stock from Outperform to Perform. The firm has removed its previous $100 price target, signaling a shift in expectations for the streaming device company's financial performance.
The downgrade comes amid concerns over the company's ability to achieve sustained high-teens growth in Platform revenue. Oppenheimer's analysis suggests that Roku's revenue growth will hover around 9% for most of 2024, which is lower than what would be required for a more optimistic stock outlook.
Oppenheimer acknowledges Roku's new management strategy, which includes embracing third-party programmatic demand and enhancing data integration to bolster performance-based advertising campaigns. Despite these strategic moves, a significant portion of Roku's Platform revenue relies on subscription video on demand (SVOD) advertising, SVOD price increases, and Media & Entertainment advertising, sectors that are anticipated to face challenges throughout most of 2024.
The firm has not substantially altered its estimates for Roku's financials but indicates that investors may find it difficult to justify the company's valuation based on 2027 estimated EBITDA. Instead, focus may shift to the 2025 estimated Gross Profit, with Roku's stock trading at a multiple of 4.5x, compared to peers like SNAP and PINS at 6.5x and MGNI/VIZIO at 3.2x.
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