S&P 500 eases slightly from fresh record high after stronger economic growth
JPMorgan has increased its price target on shares of Roku Inc. (NASDAQ: NASDAQ:ROKU) to $92 from the previous $90 while maintaining an Overweight rating on the stock.
The firm's analyst cited positive trends and a robust outlook for the company's platform revenue as reasons for the adjustment.
The analyst's updated forecast anticipates that Roku will report a stronger than expected performance for its platform revenue in the third quarter, revising the growth estimate from 9% year-over-year to 11%, which is above the company's guidance of 9%.
The fourth quarter revenue growth estimate has also been increased from 11% to 12%. The optimism is based on a combination of factors, including stable macroeconomic and advertising trends observed within the quarter, indications of significant political advertising spending, and contributions from the Olympics, albeit to a smaller extent.
Despite the upward revision in revenue estimates, JPMorgan has chosen to keep its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) projections unchanged at $45 million for the third quarter and $25 million for the fourth quarter.
This decision reflects an expectation that Roku will maintain its guidance for second-half adjusted EBITDA to be less than the first half, which was $85 million, due in part to the seasonal nature of the company's device sales and marketing expenses.
The revised December 2025 price target of $92 is based on a threefold increase in the estimated 2025 platform revenue of $3.8 billion, which suggests an adjusted EBITDA multiple of approximately 27.5 times for 2026.
In other recent news, Roku Inc. has been the focus of numerous financial adjustments and strategic shifts. Notably, Piper Sandler has maintained its Overweight rating on Netflix (NASDAQ:NFLX), citing the company's strong performance among the teen demographic. On the other hand, analysts from Macquarie, MoffettNathanson, and Baird have adjusted their outlooks on Roku.
Macquarie raised its price target to $90, maintaining an Outperform rating, while MoffettNathanson upgraded Roku's stock to a Neutral rating, and Baird increased its price target to $75, maintaining a Neutral stance.
In strategic developments, Roku has expanded its partnership with Instacart (NASDAQ:CART), leading to enhanced interactive ad formats and targeting capabilities. This collaboration has reportedly resulted in an average sales lift of 15% for brands. Additionally, Roku has made significant changes to its Executive Supplemental Stock Option Program, allowing executives to receive monthly grants of fully vested non-statutory stock options instead of a portion of their annual base salary.
Regarding future prospects, analyst firms Needham and Oppenheimer have provided their assessments. Needham maintains a Buy rating and forecasts revenues of $1.01 billion for the third quarter of 2024, while Oppenheimer maintains a Perform rating, expressing caution about investor expectations for the company's platform revenue.
InvestingPro Insights
Recent data from InvestingPro adds depth to JPMorgan's optimistic outlook on Roku. The company's market capitalization stands at $11.2 billion, reflecting investor confidence in its growth potential. Roku's revenue for the last twelve months as of Q2 2024 reached $3.75 billion, with a notable revenue growth of 16.46% over the same period. This aligns with JPMorgan's expectations of strong platform revenue performance.
InvestingPro Tips highlight Roku's financial stability, noting that the company "holds more cash than debt on its balance sheet" and "liquid assets exceed short term obligations." These factors provide Roku with financial flexibility to invest in growth initiatives and weather potential market volatility.
The stock's recent performance has been particularly strong, with InvestingPro data showing a 17.88% price return over the past month and a 26.12% return over the last three months. This robust performance supports JPMorgan's observation of Roku's 40% stock increase since the Q2 earnings report.
It's worth noting that InvestingPro offers 11 additional tips for Roku, providing investors with a more comprehensive analysis of the company's financial health and market position. These insights can be valuable for those looking to make informed investment decisions in the dynamic streaming industry.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.