Despite ballooning operating losses (almost $250 million) and a slump in advertising sent Roku’s stock soaring the day after it reported fourth-quarter earnings on Feb. 15. This includes a company led by Anthony Wood, with active users reaching his 70 million mark, and a quarter. Roku also pledged to tighten expenses going forward, with plans to turn adjusted earnings positive before interest, taxes, depreciation and amortization in 2024.
Longer term, though, Wall Street’s view of the stock is mixed, depending on whether it believes Roku can maintain its status as a key gatekeeper of the streaming landscape with its media player. (Roku stock was at $71.59 at the market close on February 17.)
A team of analysts at investment bank Evercore, which has an $80 price target on the company, said Roku has tremendous exposure to the scatter ad market (where ad slots are curtailed during pre-sales), and has seen its share price rise over the past few years. He points out that the pressure is increasing. Month. Analysts say Roku failed to profit from its political and sports advertising dollars and has supported other ad-based businesses throughout the recession. They’re looking at a business model that’s fought some pretty big headwinds, not broken itself. And it could improve once those headwinds subside.
Roku gave weaker-than-expected guidance for the next quarter, but many analysts believe the company is conservative, with Wells Fargo analyst Steven Cahall writing mildly optimistic. . “The advertising market doesn’t seem to get worse or better in the first quarter. We have a hard time assessing the business given the inconsistent results from the economic climate cited by management.”
The positives for Roku going forward include the company’s plans to keep costs down (a plan only stock bulls believe), Roku channel engagement is up, and streaming time is up 85% year-on-year. Including the fact that it is increasing more. Shoppable advertising partnership with Walmart. It’s also a plus that he hired three new executives this fall, including former Fox Entertainment CEO Charlie Collier. Charlie Collier now heads up Roku’s advertising and content business, including Roku Originals, and is known for doing more. Analysts at investment bank Oppenheimer said: “We believe Roku can continue to be a market leader in consumer connected TV solutions by leveraging its advantages in pricing and merchandising. ‘ writes his team of analysts at investment bank Oppenheimer.
Similarly, Macquarie’s Tim Nollen, who has a $70.10 target price on Roku, writes: Technology and partnerships could lead to a recovery this year. ”
But MoffettNathanson analysts (who have a $38 price target) are clearly bearish on the stock, suggesting that Roku could be adversely affected by the greater pressures facing active companies. I believe I have. These experts argue that the streaming wars have artificially buoyed stock prices, causing all major media companies to invest in content and marketing in their pursuit of subscriber numbers. This ultimately paid off for Roku’s platform and advertising business. But now, as companies like Disney, Warner Bros. Discovery and AMC Networks look to cut spending, the tide is turning.
“We are not Luddites. Yes, we believe the future is streaming. Yes, we see the ongoing (horrifying) pressure facing linear models. But the current reality is that Roku’s Our biggest customers are now grappling with the economics of these pressures and are beginning to put a pause on the rapid escalation of streaming spending,” writes analysts at MoffettNathanson.
Roku’s latest earnings effort has been freed from those pressures, as the company announced plans in January to manufacture its own brand of TVs. We believe that the plan to manufacture rather than continue is putting pressure on profit margins. Jeffrey Wlodarczak of Pivotal Research Group (with a $55 target price) also expressed “serious concerns” about the company’s move to home devices, adding, “In conclusion, Roku’s future prospects remain uncertain.” Added.