Morgan Stanley analysts remain bearish on Roku (NASDAQ:ROKU), maintaining an Underweight rating and $60 per share price target on the stock in a note Friday despite the company's topping earnings expectations.
The bank kept its bearish outlook on the company as its revenue and gross profit growth outlook for Roku remains below consensus and "too modest to generate meaningful GAAP earnings over the next several years."
Despite the bearish outlook, analysts also noted that if Roku can successfully accelerate its platform revenue growth by 2025, there could be significant upside to the shares.
Recent and new strategy shifts for the company include leveraging third-party DSPs for additional advertiser demand, new ad formats in the home screen, and growing subscriptions.
However, Morgan Stanley notes the risks to this acceleration include rapidly growing CTV ad supply (Prime Video, Netflix, etc.) and Subscription Video On Demand (SVOD) platforms working to avoid and reduce distribution fees.