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Oppenheimer: Meeting with CFO Steve Louden Sheds Light on Roku

In addition to being the OTT leader, Roku (ROKU) usually generates strong opinions. Is the loss-making TV disruptor overvalued or is its rich valuation justified due to its future growth potential? Some Wall Street analysts claim it is a harbinger for how all TV will be consumed in the future, even going so far as to call it “the new Netflix.” Others claim Roku operates in a competitive field with too many other big players to contend with.

Wall Street, though, is a noisy place and to get a real sense of where Roku is heading, Oppenheimer analyst Jason Helfstein recently hosted a virtual meeting with CFO Steve Louden. The analyst notes for investors some key takeaways from the conversation.

“Overall,” Helfstein said, “Trajectory of the ad platform is good with confidence in AVOD strategy. Investors are highly focused on advertising, given no formal 3Q guidance.”

It is not surprising investors’ focus has turned to Roku’s advertising business. Following a strong Q2, Roku declined to forecast Q3’s trajectory on account of the unpredictable economic conditions. Despite adding accounts due to Covid’s disruption, the OTT leader has not been immune to the slashing of ad budgets. However, Helfstein notes that “ad cancellations are no longer a headwind, but advertisers are struggling to plan campaigns in a dynamic environment.”

Additional takeaways concern 3P data from Kantar, which shows Roku is significantly ahead of Amazon “in streaming hours and other key metrics,” while the recent launches in UK and Brazil indicate that even without marketing “sales are off to a strong start with early UK rhetoric from OEMs and consumers stronger than anticipated.”

Furthermore, due to its 1P data advantage, ROKU CPMs (cost per mille) are twice as much as those of competing AVOD services.

Elsewhere, Roku’s “fastest growing segments are Tier-1 SVOD, TVOD, and advertising (in that order),” while Louden believes Roku’s “biggest risk going forward is macro environment.”

All in all, there is no change to Helfstein’s rating, which stays a Buy. The 5-star analyst’s $185 price target stays put too and represents possible upside of 16%. (To watch Helfstein’s track record, click here)

So, that’s Oppenheimer’s view, let’s take a look now at the rest of the Street’s opinion. Based on 11 Buys, 5 Holds and 2 Sells, Roku currently has a Moderate Buy consensus rating. The average price target hits $163.83 and suggests shares have a modest 2.5% upside from current levels. (See Roku stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

Marty Shtrubel
Marty Shtrubel was born in the UK, raised in Israel, and then headed back to London, where he made music and pursued a career in sound recording. After a move back to Tel Aviv, he set off on a new path and now works as a financial blogger at TipRanks.

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