Roku Inc (NASDAQ:ROKU) is set to deliver its 4Q earnings on February 15, but analysts at Oppenheimer have already reiterated an Outperform rating on the stock.
Analysts at Oppenheimer cited the connected TV platform’s opening of its ad inventory to 3P Demand Side Platforms (DSPs) by mid-2023.
“Given headwinds from the scatter market, we believe management now supports the idea of opening ad inventory to 3P DSPs,” analysts wrote. “Assuming Roku integrates 3P DSPs by mid-2023, this could result in a 40% increase to CPMs (cost per mille), a paid advertising option where companies pay a price for every 1,000 impressions an ad receives."
READ: Roku continues to frustrate but analysts at Oppenheimer see value
This could imply 13%/26% upside to Oppenheimer’s FY23/FY24 Platform revenue estimates, the analysts added.
Why 3P DSP? As Oppenheimer highlighted, former Fox Entertainment CEO Charlie Collier became president of Roku Media in October, replacing long-term executive Scott Rosenberg. Collier was previously responsible for the Tubi AVOD service, which is currently outperforming the industry, according to the note.
“We believe Collier will reorganize ROKU to accept 3P programmatic demand, becoming less dependent on scatter insertion orders or upfront deals,” analysts noted.
Separately, 4Q active account/streaming hours pre-announcement suggests “no slowdown in consumer engagement,” Oppenheimer analysts wrote.
The broker is expecting to see increased FY23E/FY24E engagement but on lower monetization in the 4Q 2022 results, leaving platform revenue essentially unchanged.
The firm is decreasing full-year EBITDA at $116M while leaving full-year 2024 EBITDA largely unchanged.
Oppenheimer has a 12-18 month price target of $75 on Roku stock, which is currently trading just above $54 on the Nasdaq.
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