Roku key initiatives to drive revenue acceleration - Guggenheim

Roku (NASDAQ:ROKU ) is poised for revenue acceleration, driven by key strategic initiatives, according to analysts at Guggenheim, who upgraded the stock from Neutral to Buy in a note Friday.

The firm has set a 12-month price target of $75 for Roku shares, representing a potential 21% upside from the August 22 close of $61.81.

"We expect investor enthusiasm for the ROKU story to grow into 3Q earnings in November as the company makes progress toward broadening video inventory advertising sales via third-party demand-
side platforms and improved home screen monetization," said Guggenheim.

These initiatives are expected to support Roku's positioning as a top-line acceleration story in 2025, with financial estimates ahead of consensus for 2024 and 2025.

Despite previous concerns about Roku's slow execution in capitalizing on its strong position in the connected TV marketplace, Guggenheim believes that the company's leadership, particularly Roku Media President Charlie Collier and Chief Financial Officer Dan Jedda, will strengthen monetization and drive disciplined performance over the next three to six months.

This improved execution is anticipated to enhance investor confidence and better position Roku for long-term outperformance.

However, Guggenheim cautions that competition in the advertising and connected TV marketplaces could still pressure Roku's financial performance.

Nevertheless, the firm's revised rating reflects its confidence that Roku will make significant progress toward achieving a 15% normalized operating income before depreciation and amortization (OIBDA) margin through a combination of revenue growth and cost management.

Overall, Guggenheim sees Roku's strategic initiatives as key drivers of revenue acceleration, bolstering the company's growth narrative and potentially leading to substantial upside for investors.

Source: Investing.com