Roku Inc (NASDAQ:ROKU) retained an outperform rating from analysts at Oppenheimer on Thursday, even as the broker slashed its price target to $58 from $80 after the company warned on fourth-quarter revenues.
Despite beating Street expectations in the third quarter, with revenue growth 9% ahead of forecast, shares tumbled after hours Wednesday, and further Thursday, as the group warned fourth quarter revenues would be 11% below analyst expectations as management expects a deteriorating scatter market.
Oppenheimer pointed out that the company, which makes a variety of digital media players for video streaming, has beaten its platform revenue estimates in 13 of the past 15 quarters by an average of 8% so “we would not overly focus on 4Q guidance.”
READ: Roku shares drop on weak fourth-quarter revenue forecast
The broker estimated fourth quarter platform revenue would fall 7% year on year and by 3% against quarter three with player revenue down 8% year on year. Fourth quarter EBITDA is seen around $87 million below Street expectations.
Cuts to earnings forecasts were also made by the broker with full-year 2023 revenue expectations lowered by 3% which assumes 2022 and 2023 platform revenue growth of 16% and 12% respectively.
Reductions to 2022 and 2023 estimates for non-GAAP gross profit of 3% and 4% and 2022 and 2023 EBITDA of $54 million and $117 million were also pencilled in.
All that said, Oppenheimer retained its outperform rating and noted that even at the reduced price target the company would trade on a 37% discount to its peers on 20x 2026 estimated EBITDA discounted 13% annually.
Accepting the group continues to frustrate investors the broker thinks we could be “at a pivotal juncture” with September’s appointment of Charlie Collier as President of Media.
Collier, the former CEO of FOX Entertainment and president of AMC, will open Roku ad inventory to third party DSPs so it becomes less dependent on the TV scatter market, it suggested.
Shares in Roku were trading down 4.45% at $53.44 Thursday afternoon.
Contact the author at jeremy@proactiveinvestors.com