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With streaming video consumption on the rise around the world and the company set for further smart TV share gains, Roku is positioned to benefit from accelerated international growth, Guggenheim analyst Michael Morris has highlighted in a report, boosting his stock price target on the company by $10.
Roku shares dropped sharply in 2021, amid investor worries about weaker-than-hoped revenue and accounts growth, following a 2020 jump amid the COVID pandemic, which had boosted streaming usage. While some on Wall Street went into 2022 seeing Roku as a good pick, its stock price has kept dropping amid broader pressure on technology stocks and company-specific concerns. Roku has fallen from its 2021 close of $236.20 to $125.27 at Thursday’s market close, but it moved slightly higher in early Friday trading.
Earlier in the year, Morris had slashed his Roku stock target from $210 to $135 on latest earnings and management forecasts, which included more spending than experts had expected. “While we understand a broader frustration with a … guidance miss and higher-than-anticipated spending in 2022, we do believe that the company operates a valuable asset with a significant secular growth tailwind and incremental revenue opportunities,” he wrote at the time.
Now, Morris has upped his target on Roku shares, which he rates a “buy,” to $145, touting that the company’s “international monetization (is) poised to accelerate.” Noting data from online retailers on top smart TVs, Morris also explained: “The majority of datapoints shows Roku TV’s position is improving, particularly within Latin American markets,” adding that the company “is in early innings of development … particularly newer European and Latin American markets.”
The analyst highlighted that approximately 93 percent of the world’s television households, 61 percent of TV advertising sales and 60 percent of total advertising sales are outside of the United States, per S&P-Kagan. “We believe that Roku is structured for strong long-term international share gains, with current operating system market share and revenue contribution in the very early stages,” Morris concluded.
After all, with continued rollouts around the globe, Roku’s international active accounts base abroad is set to expand further. “At current, we estimate that Roku’s mix is 88 percent/12 percent domestic/international, with the bulk of international accounts in Canada (2.7 percent), the U.K. (3.4 percent) and Mexico (3.0 percent),” the Guggenheim expert wrote. “We expect the account mix to index significantly higher within (international) markets, particularly in Latin America and Europe, as Roku continues to actively scale those TV regions.”
Morris also sees opportunity beyond Latin America and Europe though. “Longer term, we view Asia-Pacific as an attractive opportunity given more than 400 million smart TV shipments forecasted in 2026 per S&P Kagan and overall secular growth in connected TV adoption.”
The Guggenheim expert’s 2026 projections call for Roku to have 68.2 percent of its active accounts in the U.S., with Mexico accounting for 5.8 percent, Germany reaching 4.8 percent, Brazil being at 4.1 percent, the U.K. at 3.4 percent and Canada at 3.0 percent.
In his latest report, Morris also addressed how his new $145 price target compares to streaming giant Netflix, noting that it “represents an around 13 percent discount to the market multiple for Netflix, given Netflix’s higher member penetration versus Roku active account growth.”
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