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Roku Inc. shares nabbed an upgrade Monday, with an analyst at Susquehanna Financial Group saying that certain trends for the streaming-media company may have bottomed late last year.
“Despite near-term noise, we believe the long-term [connected TV] opportunity remains intact and continue to see [Roku] as a prime beneficiary of the secular shift of linear budgets,” Susquehanna’s Shyam Patil wrote as he upgraded the stock to positive from neutral. “In fact, we see most of the opportunity as still in front of the company.”
Shares of Roku
ROKU,
were up more than 5% shortly after Monday’s open.
Roku has been dealing with a difficult advertising climate lately, but Patil said trends in the scatter-ad market likely bottomed toward the end of the fourth quarter, with building improvement throughout the current quarter. The scatter market represents ads bought during the quarter.
Patil also sees encouraging trends beyond scatter ads. His industry checks “indicate that the broader [connected TV] market is generally healthy and should see a tailwind from the upfronts,” he said.
He pointed to commentary from Trade Desk suggesting that marketers could allocate more of their connected-TV budgets to upfront advertising this year, and said “the majority of U.S. advertisers expect to prioritize [connected TV], or a combination of [connected TV] and linear, in this year’s upfronts.”
Patil deems first-quarter consensus expectations for Roku to be derisked, and he noted that forward estimates appear “likely to have bottomed as well.”
He joins Wolfe Research analyst Peter Supino in upgrading Roku shares this month, though Supino moved to a peer-perform rating from his prior underperform stance.
Roku’s stock has lost nearly half its value over the past 12 months but is up 55% to start 2023.
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