Roku revenue ‘tracks YouTube trends closely’

© Reuters Roku (ROKU) Revenue ‘closely following YouTube trends’ – Citi

By Sam Boughedda

A Citi analyst defended Roku (NASDAQ:) in a research note on Wednesday, saying the company’s analysis suggests Roku’s platform revenue is tracking YouTube trends closely.

Roku shares fell more than 20% on its outlook, disappointing investors. The analyst, who has a Buy rating on Roku, lowered the company’s price target from $165 to $125.

“We believe recent revenue weakness is a function of macroeconomic headwinds and not reflective of business execution issues. Additionally, we note that Roku has $15 of net cash per share (approx 20% of the company’s equity value),” he added. Explain.

The analyst said the share price plunge after the release was due to him missing Street’s estimates and offering a weaker-than-expected forecast for the third quarter, withdrawing his outlook for the year complete.

“Despite a weaker macro backdrop, we remain constructive on Roku for four reasons: 1) we believe the macro will improve, 2) the company has $15 of net cash per share on the balance sheet, 3) the company could see strategic interest from given current valuation and 4) long-term, we believe Roku remains well positioned to benefit from the secular shift to connected TV,” the analyst concluded.

Elsewhere on Wednesday, a CFRA analyst downgraded Roku from Hold to Strong Sell, lowering the company’s price target to $57.00 from $70.00.

Raymond T. Helms