Roku
posted strong quarterly results and guidance, but one Wall Street team says it is stepping to the side on the streaming-media company until revenue growth ticks higher.
Oppenheimer analysts led by Jason Helfstein downgraded Roku to Perform from Outperform and removed their $100 price target in a Friday report. They said they “see the stock range-bound until the company sustainably delivers
high-teens Platform revenue growth (vs. our 9% estimate for most of ’24).”
Analysts said a large portion of revenue from its streaming platform, as opposed to streaming devices, is derived from streaming services’ advertising and price increases, as well as media and entertainment advertising. All those contributors to platform revenue are expected to struggle for most of the year, the Oppenheimer team said.
In morning trading on Friday, Roku stock was down 19% to $76.53, on track for its largest decrease since July 29, 2022, when it dropped 23%, according to Dow Jones Market Data. The
S&P 500
dipped 0.2%.
On Thursday, Roku posted a fourth-quarter per-share loss of 55 cents, in line with the consensus forecast among Wall Street analysts tracked by
FactSet.
Total net revenue was $984.4 million, compared with the $967.7 million analysts had anticipated. It also notched positive adjusted earnings before interest, tax, depreciation, and amortization and free cash flow for 2023, a year earlier than anticipated.
“We plan to increase revenue and free cash flow and achieve profitability over time,” the company said in its letter to shareholders. “At the same time, we remain mindful of near-term challenges in the macro environment and an uneven ad market recovery.”
For the first quarter, Roku expects total net revenue of $850 million and to break even in terms of adjusted Ebitda. Analysts had penciled in $841 million of revenue and a loss of $2 million.
Management also expects to deliver positive adjusted Ebitda for all of 2024.
Wedbush analysts Alicia Reese and Michael Pachter deemed it an “almost perfect quarter,” reiterating their Outperform rating and $120 price target in a Friday report.
Raymond James analysts led by Andrew Marok, however, were a bit more tentative, maintaining their Market Perform rating.
“Underlying trends in TV viewership and budget shifts remain favorable, though the pace of recovery of the broader ad market and Media and Entertainment in particular are raising enough questions to limit near-term optimism,” they wrote.
Write to Emily Dattilo at [email protected]
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