Roku named Needham's top stock pick for 2025

Investing.com -- Buy-rated Roku (NASDAQ:ROKU ) has been named the top stock pick for 2025 by analysts at Needham & Company, who see multiple drivers for significant growth in the coming year. 

They cite connected TV (CTV) ad growth and industry consolidation as key factors that will boost Roku’s valuation. 

The firm, which has a $100 per share target for the stock, listed Roku’s 10 upside drivers for 2025:

Expanding Installed Base: Roku’s installed base is expected to grow to nearly 100 million homes, reaching approximately 200 million viewers by the end of 2025.

CTV Ad Revenue Growth: Needham sees industry CTV ad revenues growing by 16% year-over-year to $33 billion. With 100% of Roku’s ad revenues coming from CTV, the company is said to be well-positioned to capitalize on this high-growth segment.

Full-Funnel CTV Ads: The firm believes Roku stands to benefit from the rapid growth of full-funnel CTV ads, which are expected to expand fastest in 2025.

Monetization of First-Party Data: Roku’s first-party data, which has not been separately monetized, represents a hidden asset, according to Needham. The analysts believe large language models (LLMs) will increasingly value these permissioned data sets.

Financial Growth: Roku’s free cash flow (FCF) is projected to grow significantly, from approximately $200 million in 2024 to over $320 million in 2025, with Needham expecting further growth in 2026.

Direct DSP Integrations: Roku is anticipated to announce more direct deals with demand-side platforms (DSPs), which could accelerate ad revenue growth and improve the sell-through ratio of its ad inventory.

Revenue Diversification: Roku’s diversification into content licensing and subscription revenues is expected to drive multiple expansion and reduce business risks.

Bottomed-Out Media & Entertainment (M&E) Revenues: Needham said that after a decline in M&E ad spending, Roku is projected to see a 10% growth in this segment in 2025.

Resilient Competition: Despite competition from tech giants like Amazon (NASDAQ:AMZN ) and Google (NASDAQ:GOOGL ), the firm notes that Roku has significantly grown its installed base since its IPO.

Device Growth: Retail shifts in TV shelf space are expected to favor Roku, particularly after Walmart’s acquisition of Vizio.

Source: Investing.com