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Investing.com -- Shares of Roku (NASDAQ: NASDAQ:ROKU) rose 7% today after Guggenheim analyst Michael Morris maintained a buy rating on the company, expressing a high conviction in its future performance. Morris highlighted Roku’s momentum and efforts to enhance platform monetization, which are anticipated to strengthen the business by the end of 2025.
Morris noted Roku’s strategic focus on monetization-based operating metrics, expansion of third-party partnerships, and development of revenue-generating offerings. These initiatives are expected to incrementally improve profitability and free cash flow, contributing to a more valuable enterprise. Despite a reduction in the price target to $100 from $115, due to a contraction in the relative peer multiple, the analyst’s outlook remains optimistic.
In his analysis, Morris pointed out Roku’s continued growth in streaming account penetration, projecting that the first quarter will conclude with over 92 million homes globally and over 65 million domestically. This growth signifies Roku’s presence in more than half of the approximately 120 million domestic broadband homes. Additionally, Roku’s penetration in international markets such as Mexico, where it is in over 40% of broadband homes, and its status as the most penetrated streaming-TV operating system in Canada, were emphasized.
The Roku Channel (TRC) was also mentioned as a significant driver, now ranking as the second most watched app on Roku televisions and the fifth largest streaming platform according to the Nielsen Gauge. TRC’s viewership growth, particularly on televisions running the Roku operating system, suggests potential for further expansion on non-Roku platforms.
Morris’s comments reflect confidence in Roku’s trajectory, stating, "We maintain our high conviction that Roku will further improve engagement and economics in 2025, and that the business will exit the year at its strongest." This sentiment has resonated with investors, leading to today’s uptick in Roku’s stock price.
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