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On Friday, Evercore ISI lowered the price target on Roku Inc. (NASDAQ:ROKU) shares from $105.00 to $80.00 while maintaining an "In Line" rating. Currently trading at $67.27, the stock has shown significant volatility, with a 52-week range of $48.33 to $104.96. The adjustment follows Roku’s mixed first-quarter results and forward guidance. The company reported a modest revenue beat for Q1, indicating that advertiser demand is holding steady, with revenue growing 18% year-over-year to $4.1 billion. However, Roku’s gross profit and EBITDA fell short of expectations due to a shift in ad buyer behavior towards the spot market and programmatic channel, which increased supply chain costs. According to InvestingPro data, the company maintains a strong balance sheet with more cash than debt and a healthy current ratio of 2.62, though it’s currently trading at a high EBITDA multiple of 98.14x.
Roku’s management has revised its revenue guidance for FY25 based on a more conservative outlook for device sales. Additionally, the gross profit forecast has been lowered due to a less optimistic expectation for Platform Gross Margin (GM). Despite these downward revisions, the company has kept its EBITDA outlook intact, citing a slightly lower operational expense (OpEx) projection. Roku also remains committed to reaching 100 million households, although achieving this target will now depend more on third-party (3P) devices, introducing additional risk to the company’s strategy.
The company’s recent performance has shown improved execution and consistency, but Evercore ISI suggests that Roku’s fundamentals could be at risk given the current macroeconomic uncertainties. While the stock’s valuation has not reached a point that Evercore ISI deems "truly dislocated," the firm has reiterated its "In Line" rating, signaling a neutral stance on the stock’s potential performance. InvestingPro analysis suggests the stock is currently undervalued, with analysts setting price targets ranging from $60 to $130. Discover more insights and 6 additional ProTips for ROKU, along with a comprehensive Pro Research Report covering 1,400+ top stocks, available exclusively on InvestingPro.
In other recent news, Roku Inc. announced its financial results for the first quarter of 2025, surpassing analysts’ expectations. The company reported an earnings per share (EPS) of -$0.19, beating the forecasted -$0.26, while revenue reached $1.02 billion, slightly above the anticipated $1.01 billion. Despite this positive outcome, Roku’s stock experienced a decline of 4.86% in after-hours trading. The company highlighted strong growth in platform revenue, driven by increased engagement and strategic acquisitions, including the purchase of Friendly, a skinny bundle subscription service. Roku has reaffirmed its full-year platform revenue guidance, expecting growth of 15-17%, and projects positive operating income by the second quarter of 2026. Analysts from JPMorgan and other firms inquired about the company’s strategies, including the impacts of tariffs on its device business and programmatic advertising. Roku executives emphasized their confidence in the company’s strategic direction and its ability to navigate current market conditions. Additionally, the company reiterated its focus on expanding its advertising capabilities and leveraging its first-party data to enhance performance for advertisers.
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