Although shares of Roku Inc ROKU offer less near-term upside, the company is likely to emerge as a winner in the longer term, both during and after the COVID-19 crisis, according to Benchmark.

The Roku Analyst

Daniel L. Kurnos initiated coverage of Roku with a Buy rating and $153 price target.

The Roku Thesis

Roku is insulated from broader advertising pressure in the near term and is a significant beneficiary of any recovery in the cost of ad impressions, Kurnos said in the Wednesday initiation note. (See his track record here.)

The company may face revenue share pressure over time, but could continue to benefit from subscription-video-on-demand channel growth, the analyst said. This may be accompanied by significantly lower unsubscribe exposure due to Roku’s free price tag, he said. 

“International remains a nascent, greenfield opportunity that, while weighing on profit, could become material to revenue as early as 2021.”

Kurnos expects Roku to win with or without the coronavirus. Even if this phase extends, almost half of Roku’s advertising revenue is locked-in via upfront contracts, and over 40% impression growth and a shift to video will help offset any dramatic decline in the cost of ad impressions, the analyst said. 

A continued pandemic environment could create subscriber tailwinds with a rise in jobless claims, he said. 

If the pandemic is quickly resolved, it could result in a sharp rise in ad trends, according to Benchmark. 

ROKU Price Action

Shares of Roku were up 0.8% at $120.31 at the time of publication Wednesday.