Roku Revenues 'Closely Tracking YouTube's Trends'

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Roku Revenues 'Closely Tracking YouTube's Trends' - Citi

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By Sam Boughedda

A Citi analyst defended Roku (NASDAQ:ROKU) in a research note on Wednesday, stating the company's analysis suggests Roku's Platform revenues are closely tracking YouTube's trends.

Roku shares tumbled over 20% following its second-quarter results and outlook, which disappointed investors. The analyst, who has a Buy rating on Roku, lowered the firm's price target from $165 to $125.

"We believe the recent topline weakness is a function of macro headwinds and does not reflect execution issues at the firm. In addition, we note that Roku has $15 of net cash per share (about 20% of the firm's equity value)," he explained.

The analyst said the share price fall following the release was down to the fact it missed Street estimates and offered weaker-than-expected third-quarter guidance, withdrawing its full-year outlook.

"Despite a weaker macro backdrop, we remain constructive on Roku for four reasons: 1) we believe the macro will improve, 2) the firm has $15 of net cash per share on the balance sheet, 3) the firm could see strategic interest from peers given the prevailing valuation and 4) long-term, we believe Roku remains well positioned to benefit from the secular shift to connected TV," concluded the analyst.

Elsewhere Wednesday, a CFRA analyst downgraded Roku from Hold to Strong Sell, lowering the firm's price target to $57.00 from $70.00.

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