Moffett Nathanson upgrades Roku on near-term strength

Investing.com -- Moffett Nathanson upgraded Roku (NASDAQ: ROKU) to "Neutral" from "Sell" on expected near-term strength in advertising revenue, though it maintained concerns about long-term competition in the TV operating system space.

The firm raised its price target to $70, noting that Roku’s track record of outperforming guidance and an acceleration in ad revenue growth, boosted by demand-side platform spending and discounted ad pricing, set up 2025 as a "beat-and-raise" story.

“While our long-term, negative-leaning thesis on Roku remains unchanged, we are upgrading Roku from Sell to Neutral and increasing our price target by +$12 to $70,” analyst at Moffett Nathanson said.

Moffett Nathanson said it may have been premature in its earlier downgrade, as the stock is now trading slightly below that level. However, the firm reiterated concerns over Roku’s ability to defend its market share in streaming devices, which remains critical to its broader business.

"When we downgraded Roku to Sell in early January, we acknowledged that while our estimates were ahead of consensus in the near term, we were in line with Street expectations in the long-term, suggesting to us that the multiple at which the stock was trading was unwarranted"

With the company expected to outperform Street expectations in the near term, analyst said “Roku’s results will be strong and better than expected in the near term, and it is hard to fight momentum… for now”

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