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On Friday, Morgan Stanley (NYSE:MS) analysts adjusted their price target for Roku Inc. (NASDAQ:ROKU), increasing it to $75.00 from the previous $67.00. Despite the raised target, the firm maintained its Underweight rating on the company's shares. The analysts noted Roku's successful execution of three growth initiatives set out a year prior. They also highlighted that a significant portion of the company's upside in 2024 was due to political advertising revenue. According to InvestingPro data, Roku's stock has shown remarkable momentum, delivering a 54.39% return over the past six months and currently trading near its 52-week high of $95.17.
The analysts elaborated on Roku's financial prospects, indicating that at a $100 share price, the valuation stands at approximately 27 times the estimated adjusted EBITDA for 2026. However, they expressed caution by mentioning that even with the adjusted EBITDA, Roku is expected to have a negative EBITDA post-Stock-Based Compensation (SBC) in 2026. This suggests that while the company is making headway with its growth strategies, there are still financial challenges ahead. InvestingPro data reveals the company's current EV/EBITDA ratio stands at 206.19x, with revenue growing at 18.03% year-over-year despite ongoing profitability challenges.
The statement from Morgan Stanley also pointed out that Roku might face tough comparisons in the year 2025, suggesting that the company's performance benchmarks could be challenging to surpass due to the high political advertising revenues in 2024. This factor, combined with the full valuation, presents a complex outlook for Roku as it progresses.
The price target increase reflects Morgan Stanley's recognition of Roku's operational achievements and its ability to capitalize on opportunities such as political advertising. However, the Underweight rating indicates that the analysts see limited upside potential for the stock at its current valuation, especially considering the anticipated financial landscape in the coming years.
Roku Inc. is a company that operates in the streaming television sector, providing a range of products and services that include streaming devices and an advertising platform. The company's performance is closely watched by investors as the streaming industry continues to evolve and expand. For investors seeking deeper insights, InvestingPro offers a comprehensive analysis of Roku's financial health, including 12+ additional ProTips and a detailed Pro Research Report that transforms complex Wall Street data into actionable intelligence.
In other recent news, Roku Inc. has seen a flurry of activity from analysts, with multiple firms revising their price targets. Needham raised its price target for Roku to $120, citing strong performance highlighted by a surge in its installed base and political advertising revenue. Meanwhile, Susquehanna adjusted its price target to $125, recognizing Roku's potential for growth in the expanding connected TV (CTV) advertising space.
In addition, Wolfe Research increased its price target for Roku to $108, noting the company's impressive platform revenue growth. Pivotal Research upgraded Roku's stock from a Hold to a Buy rating and dramatically increased the price target to $125, based on optimistic revenue growth projections. Lastly, JMP Securities raised its price target for Roku to $115, fueled by Roku's full-year 2025 guidance, which forecasts gross profit and EBITDA figures surpassing consensus estimates.
These recent developments underscore the positive outlook for Roku's financial performance and growth potential. Analysts emphasize Roku's strategic value, its reach, and its ability to further monetize its platform. These revisions reflect the analysts' confidence in Roku's ability to capitalize on opportunities in the CTV advertising market and its robust financial health.
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