Wedbush has reiterated its bullish stance on Roku Inc (NASDAQ:ROKU) ahead of its fourth quarter earnings report, due on February 12, with analysts pointing to the company’s “profitable growth drivers” and positioning on their Best Ideas List.
The analysts maintained an ‘Outperform’ rating and $130 price target, which implies significant upside from current levels of about $86.
The analysts wrote that Roku benefits from “accelerating monetization with an underappreciated runway” and “improving profitability as Roku remains focused on delivering strong free cash flow (FCF) amid growth.”
They also highlighted the company’s “favorable tax position likely leading to higher FCF available for share repurchases,” a factor they say, combined with a clean balance sheet, positions Roku to accelerate buybacks.
Wedbush expects Q4 revenue of $1.35 billion, up 12% year-over-year, in line with guidance and the consensus.
They modeled Platform revenue at $1.19 billion, up 15% year-over-year, and Devices revenue at $160 million, down 3% year-over-year.
While Roku no longer discloses average revenue per user (ARPU) and streaming household data, Wedbush estimates a conservative ARPU of $43.51 versus the consensus of $44.43, and 99.2 million streaming households, compared with the consensus of 97.4 million.
The analysts noted that Roku’s results will “underscore its increasingly diversified business model, with significantly more advertising opportunities crossed with its burgeoning recommendation functions.”
They highlighted Roku’s Ads Manager for SMBs as a key growth driver, allowing the company to capture the ongoing shift of social media ad dollars to connected TV for small digital-first advertisers leveraging embedded AI technology.
Wedbush also pointed to Roku’s deepening integration with Amazon, which began in Q4 and is expected to roll out methodically, creating “strong demand and incremental ad inventory and bookings,” alongside other DSP partnerships.
On margins, Wedbush expects Roku to report Platform gross margin of 52.2% versus consensus of 52.1%, and Devices gross margin of -29.0% versus consensus of -26.2%.
Adjusted EBITDA is projected at $145 million, in line with guidance and slightly below the consensus of $146.6 million.
Looking ahead, Wedbush believes Roku’s ongoing structural initiatives position it to accelerate revenue and earnings momentum throughout 2026 and 2027, even though they do not see a single “light switch” inflection in Q4.
They noted that current expectations for 2026 remain modest, with consensus estimates of $5.347 billion in total revenue, $4.736 billion in Platform revenue, and $590 million in adjusted EBITDA, roughly in line with Wedbush’s projections.