Jefferies: ’Better days ahead’ for Roku

Investing.com -- In a note Thursday, Jefferies upgraded Roku (NASDAQ:ROKU) to Hold, citing stronger-than-expected platform revenue growth, improving ad fill rates, and a clear path to profitability. 

“Better days ahead,” said Jefferies. “The bear case has weakened as Roku outgrew many ad peers in the quarter, profitability is inflecting, and Roku retains multiple tailwinds to growth in FY25.”

Roku’s Q4 platform revenue surged 25% year-over-year (19% ex-political), significantly exceeding its 14% guidance. 

Jefferies attributed this outperformance to election-related ad spending, growing programmatic ad sales, and late-quarter ad inflows. This marks Roku’s strongest platform growth rate since Q2 2022.

Looking ahead, Roku expects FY25 platform revenue to grow 15% year-over-year (excluding political ads), in line with FY24’s growth rate. Adjusted EBITDA is forecast to rise 20%, a sign that Roku’s profitability is accelerating. 

Jefferies noted that concerns over a post-election slowdown have eased, writing, “Between the Q4 outperformance, a Q1 guide +3% to Street, and a FY guide that does not imply a slowdown on an adjusted basis, it is clear to us that Roku has strengthened its position as an ad platform.”

Jefferies highlighted three key drivers for Roku’s continued growth.

First, its programmatic ad Sales and partnerships. “Roku is most integrated with TTD but is still strengthening partnerships with Yahoo and Google (NASDAQ:GOOGL). We expect this to be a continual tailwind in ’25/’26.”

Fill rate improvements is also seen as a growth driver. They believe Roku’s ability to price ads across the curve differentiates it from premium players, which could boost ad fill rates despite broader CTV pricing pressures.

Finally, Jefferies says Roku’s cost discipline and expansion of first-party ads are expected to support margin growth.

Jefferies maintained a $100 price target on the stock, stating, “Our $100 PT implies 23x FY26 EBITDA and 2.3x FY26 EV/Sales.”