J.P. Morgan analyst Cory A Carpenter reiterated an Overweight rating on the shares of $Roku Inc (ROKU.US)$.
Roku is slated to report first-quarter FY24 earnings on Thursday, April 24.
There is often noise in the scatter market ahead of the Upfronts (& re-setting of prices). Still, the analyst is yet to see evidence of meaningful scatter improvement, and thus, the analyst noted that the first-quarter revenue upside is likely to mirror that of the fourth quarter (3% beat) vs. Roku's 9% average beat from 3Q22-3Q23.
The analyst noted Roku is likely to guide second-quarter Platform revenue to about 10% Y/Y (vs. 13% guide in first quarter), with the potential for further deceleration in the third quarter.
The analyst noted the biggest opportunity to re-accelerate Platform revenue is for Roku to improve ad fill rates that are estimated to be at a historically low ~40%.
The analyst recognizes that investors are skeptical in a revenue re-acceleration into potential CPM compression and $Walmart (WMT.US)$ / $VIZIO (VZIO.US)$ merger.
While the analyst is tactically cautious about first-quarter earnings, it is prudent to remain positive on the secular growth of connected TV & Roku's longer-term monetization opportunity.
The catalyst path after first-quarter earnings, according to the analyst, includes Upfronts, with Roku's presentation on April 30, WMT/VZIO regulatory updates, with the Hart-Scott-Rodino expiry on April 29, and potential FTC second request, and Roku guiding to fourth-quarter Platform revenue re-acceleration at third-quarter earnings.