Needham Highlights Why They Would Buy Roku Inc. (ROKU) on Weakness

August 5, 2021 6:33 AM EDT
Get Alerts ROKU Hot Sheet
Price: $324.10 +0.31%

Rating Summary:
    23 Buy, 4 Hold, 1 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 7 | Down: 15 | New: 24
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Needham & Company analyst Laura Martin reiterated the price target on Roku Inc. (NASDAQ: ROKU) of $550.00 while maintaining a Buy rating after shares fell 9% in the aftermarket as a result of a difficult earnings report. Shares are down over concerns over weak active account growth in 2Q21 but the analyst would be a buyer on the weakness. Key things to like about the quarter include:

  • Roku's Installed Base of active accounts reached 55mm homes, an all-time high;
  • TTM ARPU reached $36, an all-time high;
  • 2Q21 revs rose 81% y/y to $645mm, an all-time high;
  • Platform Revs rose 117% y/y to 532.3mm, representing 83% of total revs and accelerating growth;
  • ROKU's Upfront deals doubled in value, which should be a key rev growth driver starting in Sept
  • and continuing through June 2022;
  • Gross Margins rose 110 basis points, reaching a GM of 52.4% and $338mm of Gross Profit;
  • EBITDA margins rose to POSITIVE 19% ($122mm) from negative 1% in the prior year period;
  • New advertisers are coming to Roku owing to its originals strategy, indicating that Roku's LT plan
  • is working now- in the ST,
  • All 7 major ad agency holding companies are now working with ROKU and ROKU is using its
  • content studio to become closer to brand advertising clients

The analyst stated "Our view is that COVID-19 pulled forward BY TWO YEARS the installed base of Roku's active users, so not adding new accounts as rapidly this year does not trouble us. The better numbers (to us) are ROKU's 81% rev growth and $122mm of EBITDA in 2Q21, up from a $3mm LOSS in 2Q20."

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