Roku (ROKU) Shares Rally After 'Huge Quarter', Analysts Raise PTs

Shares of Roku (NASDAQ: ROKU) are up 5% in pre-open trading Friday after reporting better-than-expected Q3 results.

Roku saw its revenue rise by 73% to $451.7 million in the third quarter compared to a year ago. The market consensus for the Q3 revenue stood at $367.8 million.

Earnings per share came in at $0.09 to beat forecasts for a loss of $0.40 a share. Roku said it added 2.9 million incremental active accounts in the September quarter to reach 46 million.

“In Q3, Roku delivered outstanding financial and operational results led by robust demand for TV streaming products, strong growth in advertising and the expansion of content distribution partnerships. As the ongoing COVID-19 pandemic continued to accelerate the shift of viewing away from traditional linear and pay TV, we continued to invest in competitive differentiation and execute well against our strategic plan,” the company said in a statement.

“During the quarter, we achieved a 43% year-over-year active account growth rate and doubled the active account reach of The Roku Channel. Despite continued uncertainties caused by the pandemic, we are pleased with the trajectory of our business and believe that Roku remains well positioned to help shape the future of television – including TV advertising – around the world.”

Following Q3 results, Susquehanna analyst Shyam Patil increase the price target on Positive-rated ROKU to $275.00 per share from the prior $185.00 after observing a “huge quarter”.

“ROKU continues to benefit from the secular cord-cutting trend and the pandemic-related increase in engagement, putting up a huge quarter, though there was a major tailwind from content distribution revenue recognition, which tends to be very lumpy. This dynamic is also leading the company to expect a meaningful decel in 4Q. We remain Positive on ROKU as we view the company as one of the few ways to play the secular linear TV-to-digital engagement and ad budget shift, which is accelerating during the pandemic,” Patil said in a note to clients.

Oppenheimer’s Jason Helfstein is slightly less bullish on Rokum as his new price target is $260.00 (up from $185.00). According to Helfsten, the last quarter’s result mark the “post-pandemic reallocation of linear TV ad spend toward OTT platforms.”

“Active accounts accelerated to +42% y/y, with strong Canada/UK growth, and no indication of COVID pull-forward. Platform revenues +78% y/y (or ~60% ex. DX); monetized video ad impression+90% y/y, roughly similar to pre-COVID levels, improving gross margins q/q. Meanwhile, new ad clients 2x y/y, with 97% advertiser retention from 2019. We are also more confident in ROKU's new performance ad platform (DSP), OneView, which should become a material revenue driver in FY21/22. Player revenues/margins exceeded on minimal discounting,” Helfstein wrote in today’s note.

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