On Wednesday, Oppenheimer maintained its Perform rating for Roku Inc. (NASDAQ: NASDAQ:ROKU) without altering its price target. The decision was influenced by several factors impacting the company's revenue projections for the coming years. Analysts at Oppenheimer pointed to a decrease in spending by studios on subscription video on demand (SVOD) services and a glut of connected TV (CTV) advertising inventory leading to weaker pricing. These issues, coupled with the uncertainty following the Hollywood strike, have prompted a revision of Roku's platform revenue growth expectations.
For the year 2025, Oppenheimer now anticipates a year-over-year increase in platform revenue of 15%, a decrease from the previously forecasted 20%. The firm has also adjusted its quarterly growth projections for the second, third, and fourth quarters of 2024 to 8%, 9%, and 13% year-over-year, respectively. Despite a generally healthy advertising market, the analysts expect that the pressure on CTV inventory pricing will persist, especially as Amazon (NASDAQ:AMZN) and Netflix (NASDAQ:NFLX) introduce more inventory into the market.
Active account growth for Roku is now predominantly fueled by international expansion, which requires investment in local content and advertising sales to bolster platform revenues. This strategy may prove challenging for Roku, given its focus on profitability. Oppenheimer's analysis also includes a comparative evaluation of Roku's trading multiples, noting that Roku shares are trading at 30 times the projected 2025 earnings before interest, taxes, depreciation, and amortization (EBITDA). This compares to Snap Inc (NYSE:SNAP). and Pinterest (NYSE:PINS) at 26 times and Magnite, Inc. and Vizio Holding Corp at 10 times their respective EBITDA projections.
InvestingPro Insights
As Roku navigates the competitive landscape of streaming and advertising, investors can gain additional perspectives from real-time data and analysis. According to InvestingPro data, Roku currently holds a market capitalization of approximately $8.92 billion. Despite the challenges outlined by Oppenheimer, Roku maintains a strong cash position, with liquid assets surpassing short-term obligations. This financial stability is reflected in the company's ability to hold more cash than debt on its balance sheet, an InvestingPro Tip that suggests a level of resilience in its financial structure.
However, the company's profitability remains in question, with analysts not anticipating Roku to be profitable within the year, which is consistent with the reported negative P/E ratio of -12.40. Additionally, the stock's volatility is evident in its price movements, and the Relative Strength Index (RSI) suggests that the stock is currently in oversold territory. This could indicate potential for a rebound, although investors should remain cautious given the stock's recent significant price drop over the last three months.
For readers interested in a deeper dive into Roku's financial health and future prospects, InvestingPro offers additional insights. There are more InvestingPro Tips available that can aid in making informed decisions, and with the use of coupon code PRONEWS24, readers can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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