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On Thursday, Roku Inc. (NASDAQ:ROKU) received an improved outlook from Jefferies, with the firm upgrading the company’s stock rating from Underperform to Hold. The upgrade was accompanied by a significant increase in the price target, which was raised to $100.00 from the previous $55.00. According to InvestingPro data, Roku’s stock has shown strong momentum, delivering a 49% return over the past six months, with analyst targets ranging from $51.57 to $130.
The positive adjustment follows Roku’s impressive year-over-year platform growth, which exceeded both the company’s guidance and analyst expectations. Roku reported a 25% increase in platform growth year-over-year, or 19% excluding political advertising, surpassing its own forecast of 14%. This performance is attributed to Roku’s successful third-party integrations and improved fill rates. InvestingPro data reveals the company’s overall revenue growth reached 18% in the last twelve months, with total revenue hitting $4.1 billion.
Jefferies’ analysts noted that Roku’s management anticipates continued growth into fiscal year 2025, projecting a year-over-year increase in line with fiscal year 2024’s figures on an ex-political basis, estimated at 15%. Additionally, Roku’s adjusted EBITDA is expected to rise by 20%, aligning with Street expectations. While the company maintains strong financial health with a current ratio of 2.62 and more cash than debt, InvestingPro analysis indicates the stock is currently trading near its Fair Value, with 12 additional exclusive insights available to subscribers.
The firm’s analysis suggests that the bear case for Roku has diminished due to the company’s ability to outperform many of its advertising peers in the quarter. The upward trajectory in profitability and the presence of multiple growth tailwinds for fiscal year 2025 were also highlighted as reasons for the upgraded rating and price target.
The revised price target of $100 is based on a 23 times multiple of Roku’s forecasted EBITDA for fiscal year 2026, as stated by Jefferies analysts. This optimistic valuation reflects confidence in Roku’s future financial performance and its strategic position in the market.
In other recent news, Roku Inc. reported impressive financial performance in the last quarter of 2024, with a notable 25% year-over-year growth in Platform revenue, surpassing expectations. Benchmark analysts raised their price target for Roku to $130, maintaining a Buy rating, and noted the company’s guidance for a 16% Platform growth in 2025, which could bolster investor confidence. Needham also increased its price target to $120, highlighting Roku’s expanded installed base and political advertising revenue as key growth drivers. Meanwhile, Morgan Stanley (NYSE:MS) adjusted its price target to $75, keeping an Underweight rating, and cautioned about potential financial challenges despite recognizing Roku’s growth initiatives.
Susquehanna raised its price target to $125, acknowledging Roku’s strong quarterly performance and potential in the connected TV advertising sector, though maintaining a Negative rating. Wolfe Research lifted its target to $108, emphasizing Roku’s 19% platform revenue growth excluding political ads and predicting a transition to a "value compounder" with positive financial projections for 2026. These developments reflect a range of analyst perspectives on Roku’s growth trajectory and strategic positioning in the streaming and advertising markets.
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