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The optimistic forecasts of Roku
The streaming service has increased their forecasts, and with more people getting into streaming, investors are optimistic.
This week, streaming player Roku must have felt like swimming against the tide.
Earlier this week, Roku's action took a big hit when Comcast media giant and social media king, Facebook, announced threats to Roku's territory. Shares rebounded when the company announced a new mid-week product line, but on Friday the Pivotal Research Group started to cover the company, but with a "sell" rating, which resulted in a drop in prices. stocks by almost 20%. However, good news came after the bell with some came back again from a major financial player.
"We are seeing increased competition that will negate the cost of OTT devices," Pivotal analyst Jeffrey Wlodarczak said in a note sent to investors Friday morning.
While the "on the top" device provider's shares are up more than 252% for the year, this week is indicative of the high volatility of the streaming landscape for Roku – and the other players .
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Wlodarczak cited various recent developments in the market, such as the announcement by Comcast of a free alternative, the Xfinity Flex streaming box, which they will give to their subscribers only on the Internet, which, according to him, "will probably be copied by other distributors. "
This will put pressure on hardware and subscription revenues, but will improve prospects for subscription-based video-on-demand services offered by them, as well as for advertising and "other" revenues that can be generated through free distribution and ubiquitous.
"Unfortunately for Roku, their already large (50/50) advertising splits with OTT readers put them potentially under-exploited by their competitors, and the already huge expenses of their distributors in terms of content give them a considerable advantage," says the report. .
All this leads Wlodarczak to question how Roku can compete with the "big boys" led by Comcast, which Pivotal attributes to a "buy" and which would make his "growth much more difficult".
"In our opinion, Roku shares still seem overvalued despite the recent downturn and we are starting with a selling price" and a price target of $ 60, "the report concluded.
The report provided a positive point for Roku, stating that his "management deserves a lot of credit for what it has created and that Roku is one of the few pure players in OTT investing".
When asked to comment, a spokeswoman for Roku told FOX Business, "We do not comment on an analyst's point of view," and attempts to reach Wlodarczak in order to Additional comments were unsuccessful.
"In our opinion, Roku shares still seem overvalued despite the recent downturn and we start with a" sale "and a $ 60 price target.
After the closing bell, Oppenheimer Funds responded by announcing that it was maintaining its "Outperform" rating and raising its price target from $ 120 to $ 155 "after evaluating the impact of the projects. Roku's international expansion and the multitude of new OTT streaming services on the market. in the fourth quarter and in 2020. "
Oppenheimer's upside scenario analysis is $ 200 if "smart TV penetration continues to grow globally" and if "a consolidated market structure prevails". The company also estimates that "Apple +, Disney + and a combination of other companies (including HBO Max) will provide $ 21 / share combined" and that they "see that Roku" is taking advantage of their penetration of the American market (~ 33%), promoting and selling SVOD subscriptions directly, competition from new entrants (Comcast and the FB portal) being too late ".
This shows that Oppenheimer has exactly the opposite meaning of the impact of Comcast's Xfinity Flex streaming box, as well as Facebook's offer, on Roku's prospects.
| Teleprinter | security | Latest | Change | % Chg |
|---|---|---|---|---|
| ROKU | ROKU INC | 108.05 | -25.71 | -19.22% |
Oppenheimer also considers that the UK market adds $ 10 a share if it can take traditional branding shares "via a similar gaming book in the US: urge consumers to adopt low-cost, high-quality TVs via OEMs [original equipment manufacturer] partnerships. "
When Wall Street opens for trading on Monday morning, this upgrade – which predicts that Roku's stock price will return to the level it opened this week – could bounce back.
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