Roku Inc (NASDAQ:ROKU) shares are trading higher after beating revenue and eps estimates for the first quarter. Analysts are out with reactions to the first quarter and thoughts on difficult comps ahead.
The Roku Analysts: Morgan Stanley analyst Benjamin Swinburne reiterates an Underweight rating on Roku and lowers the price target from $300 to $275.
Rosenblatt analyst Mark Zgutowicz reiterates a Buy rating and has a $560 price target.
Needham analyst Laura Martin reiterates a Buy rating and has a $550 price target.
KeyBanc analyst Justin Patterson reiterates an Overweight rating and lowers the price target from $518 to $460.
Q1 Takeaways: Swinburne called Roku media’s favorite streaming partner saying the company continues to impress and provide more value for its partners.
“This was particularly clear in stronger than expected 1Q revenue growth and margins,” Swinburne said.
The SVOD wars are heating up and Roku looks to be the continued winner, Zgutowicz said.
“Having now witnessed three consecutive quarters of accelerating platform revenue and gross margin, it's undoubtedly clear Roku is the clear winner of the SVOD wars,” Zugotowicz said.
Audience development and content distribution growth were strong and highlighted by the analyst.
Martin prefers Roku to Netflix Inc (NASDAQ:NFLX) in the streaming space given the TAM expansion that Roku has demonstrated.
“TAM expansion is ROKU’s secret weapon. Since going public, we believe ROKU has created the most valuation upside from expanding its TAM, which shifts its growth trajectory upwards and elongates its growth runway,” Martin said.
Items that are expanding the TAM are streaming advertisements, performance advertising, content marketing, dynamic ad insertion and ad sponsorships.
“Roku generates revenue from both AVOD and SVOD, implying it is hedge regardless of which companies win the streaming wars,” Martin added.
Patterson calls Roku’s growth one of the most robust in the internet sector. The Roku Channel reaches 70 million people and the company’s investment in original content continues to grow.
Difficult Second Half Coming: The analysts remain cautious heading into the second half of the fiscal year when Roku will face difficult comparable sales from the last fiscal year. Swinburne said Roku’s second quarter could be peak year-over-year growth before a second-half deceleration.
Zgutowicz is optimistic that the AVOD service from HBO Max launching in June will prevent a meaningful slowdown for Roku.
Patterson lowered the price target on Roku but thinks market share gains could help the company overcome difficult comparables in the second half of the year.
“Despite concerns on engagement amid reopenings, Roku expects hour per active account to increase year-over-year driven by share gains against linear TV,” Patterson said.
Patterson cautions that margins could trend lower for the rest of the fiscal year.
ROKU Price Action: Roku shares are up 11.69% to $317.32 on Friday afternoon.