While Roku Inc’s (NASDAQ:ROKU) TV operating system retains a competitive advantage, concerns over whether a lack of advertising revenue share with TV OEMs is impeding growth seem overdone, according to BofA Securities.
The Roku Analyst: Ruplu Bhattacharya maintained a Buy rating on Roku and raised the price target from $227 to $245.
The Roku Thesis: Competitive threats to Roku appear overblown, and the company should continue gaining market share as streaming services compete for subscribers, Bhattacharya said in a Friday note.
Referring to the company’s competitive advantage as a TV OS, the analyst said TV OEMs “understand the benefits of partnering with Roku.”
He expects Roku to keep updating its OS with new features and functionality — and TV OEMs to continue benefiting from them.
“Roku and TCL understand the need to expand internationally and capture as much share, as quickly as possible," Bhattacharya said of advertising revenue sharing.
"In this endeavor, both companies benefit from partnering with each other. Roku is expanding the number of TV OEMs it partners with.”
Referring to concerns around Roku’s international expansion, the analyst said the company does not need to succeed in every market to meet Street expectations for active account growth.
“We view Brazil, UK and Germany as some key markets which Roku may focus on and gaining share in these markets can go a long way in driving account and revenue growth.”
ROKU Price Action: Shares of Roku were down 1.27% at $223.60 at last check Friday.
Photo courtesy of Roku.