By Sam Boughedda
Jefferies analysts told investors in a note Thursday that demand for Roku (NASDAQ:ROKU) is "weak right now."
The note is in reaction to Jefferies hosting several toy company executives as well as leaders from streaming firms, including Roku, as part of its toy and digital entertainment bus tour.
"Coming out of 3Q earnings, there seemed to be a disparity in performance and expectations for Roku vs other CTV players such as TTD and MGNI," the analysts explained. "We believe that this is driven by Roku's reliance on the scatter market, which is mostly traditional linear TV advertisers, vs TTD and MGNI who are benefiting from digital ad dollars shifting to the CTV format."
The analysts went on to explain that Roku has been outspoken about going after the linear ad market first, but Jefferies underappreciated which portion of the ad market would keep CTV advertising in growth mode during 2023.
In addition, they stated that Roku is convinced Netflix and Disney entering Advertising Video On Demand (AVOD) streaming is good for the industry as "having premium content will drive advertisers to CTV. However, the NT impact is actually a toss-up; premium content driving more advertisers into the scatter market could be good for Roku."
"On the other hand, demand is weak right now and dollars shifting to new, hot inventory could negatively impact existing inventory," the analysts concluded.