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The lowered price target reflects these near-term headwinds, mainly related to supply chain and ad spending.
“We view these headwinds as transitory and expect a stronger 2H22. If Netflix (NASDAQ:NFLX) cracks down on password sharing, Roku could benefit if subscribers move to free Ad supported platforms. In addition, if NFLX offers an Ad supported version, Roku could benefit by having a carriage agreement with it. Some investors have asked us if Roku’s growth is peaking in the U.S. Our analysis indicates that Roku has meaningful growth remaining in the U.S., in addition to growth from international markets,” Bhattacharya said in a client note.
The analyst says that the near-term weakness present in Roku shares is “transitory” as he expects things to improve in the second half of the year.
“Like last year, we expect Roku to do well during the advertising upfronts (last year doubled dollar commitment and 42% of advertisers who committed to Roku during the upfronts were new). Roku’s themes for this year’s upfronts: The Roku Channel, The OneView advertising platform and the new Roku Brand Studio,” Bhattacharya added.
Roku stock is down 5.5% in pre-open Wednesday. Shares are down roughly 65% YTD.
By Senad Karaahmetovic
