Analysts at Oppenheimer have raised their price target for Roku after the streaming device manufacturer’s second quarter results blew away investors.
They wrote in a note to clients that they were raising their price target from $75 to $90 and maintaining their ‘Outperform’ rating on the stock on improving platform revenue trends, even with media and entertainment (M&E) and Hollywood strike headwinds.
Roku shares added 24.2% at US$84.61 at noon on Friday.
Oppenheimer’s analysts noted that in 2Q Roku reported platform revenue 11% above the Street estimate and its gross profit was 13% ahead of expectations as M&E improved quarter-over-quarter along with strength in consumer packaged goods, health, and wellness.
However, the analysts highlighted that M&E would likely weaken in the second half of 2023 due to the impact of the ongoing dual Hollywood writers and actors strikes.
“[We are] expecting M&E to be further pressured by limited fall release schedules [as a result of the strikes],” they wrote.
“Per Nielson, the Roku Channel was 1.1% of TV in June versus Peacock and Max at 1.2% and 1.4% respectively.”
They noted that Roku was actively working with third-party demand-side platforms to capture incremental demand, and early results were “positive.”
Additionally, they noted that the company was making progress towards reaching break-even earnings before interest, taxes, depreciation and amortization (EBITDA) by March, with a 9% decrease in cash operating expenses in 2Q when compared to the previous quarter.
They forecast 9% and 6% growth in platform revenue for the third and fourth quarters, respectively.
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