What Is Roku's Secret Weapon? Analysts React To Q1 Earnings, Tough Comps Ahead

Photo: Roku

Roku Inc (ROKU) shares are trading higher after beating revenue and eps estimates for the first quarter. Analysts are out with reactions to the first quarter and thoughts on difficult comps ahead.

The Roku Analysts: Morgan Stanley analyst Benjamin Swinburne reiterates an Underweight rating on Roku and lowers the price target from $300 to $275.

Rosenblatt analyst Mark Zgutowicz reiterates a Buy rating and has a $560 price target.

Needham analyst Laura Martin reiterates a Buy rating and has a $550 price target.

KeyBanc analyst Justin Patterson reiterates an Overweight rating and lowers the price target from $518 to $460.

Q1 Takeaways: Swinburne called Roku media’s favorite streaming partner, saying the company continues to impress and provide more value for its partners.

“This was particularly clear in stronger than expected 1Q revenue growth and margins,” Swinburne said.

The SVOD wars are heating up and Roku looks to be the continued winner, Zgutowicz said.

“Having now witnessed three consecutive quarters of accelerating platform revenue and gross margin, it's undoubtedly clear Roku is the clear winner of the SVOD wars,” Zugotowicz said.

Audience development and content distribution growth were strong and highlighted by the analyst.

Martin prefers Roku to Netflix Inc (NFLX) in the streaming space given the TAM expansion that Roku has demonstrated.

“TAM expansion is ROKU’s secret weapon. Since going public, we believe ROKU has created the most valuation upside from expanding its TAM, which shifts its growth trajectory upwards and elongates its growth runway,” Martin said.

Items that are expanding the TAM are streaming advertisements, performance advertising, content marketing, dynamic ad insertion and ad sponsorships.

“Roku generates revenue from both AVOD and SVOD, implying it is hedge regardless of which companies win the streaming wars,” Martin added.

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William K. 1 month ago Member's comment

It does seem a bit strange that the same stock gets such different ratings. What is the reason?And why so different?

And what is "TAM"???

But a very interesting article, despite the acronym.