JMP upgrades Roku, says stock is poised to dominate the U.S. streaming market

JMP thinks Roku its well-positioned in streaming — an industry that is benefitting from increasing viewership and advertising. Analyst Matthew Condon initiated coverage of the streaming television company with a market outperform rating and $95 price target. That suggests 25.2% upside for the stock Condon said Roku could be a major beneficiary from the rapidly growing advertising spend in the connected TV, or CTV, segment — which is expected to grow at a 15% compound annual growth rate between 2024 and 2027. About $166 billion of linear TV ad spend is shifting to CTV, a trend driven by streaming platforms aggressively acquiring rights to live sports, the analyst said. “We believe Roku’s position as the top streaming platform in the U.S. is sustainable given its structural cost advantages and easy-to-use,” Condon wrote in a note, adding that “near-term competition concerns are overdone” as Roku is already a scaled CTV provider compared to its peers. Condon thinks Roku has multiple avenues to grow its engagement and monetization. The company can see continued growth from its extensive customer base and services, particularly from its Home Screen, which he said is a “lead-in” for more than 120 million customers and its Roku Channel. Roku reaches more than 90 million streaming households and is nearly covering half of all U.S. broadband households, the analyst pointed out. “With multiple catalysts across its Home Screen and The Roku Channel monetization and deepening third-party demand partnerships, we believe revenue estimates can move higher from here,” he said. Condon added that although competition is increasing in the television operating system market, with Walmart having acquired Vizio and The Trade Desk launching Ventura, he believes Roku’s operating system design for low-cost hardware and its user-friendly interface “remain key differentiators to sustaining its leadership position.” Shares climbed more than 1% following JMP’s call. Analyst sentiment on the stock is mixed. Of those who cover it, 13 rate it a buy or strong buy, while another 17 have a hold rating, according to LSEG. Another three have underperform or sell ratings on shares.