Roku ticks up as Pivotal upgrades, noting 'reasonable' valuation at current levels
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Roku (NASDAQ:ROKU) shares ticked up on Friday as investment firm Pivotal Research upgraded the stock, noting that the 62% decline in shares year-to-date has left its valuation "reasonable" in light of the current environment.
Analyst Jeff Wlodarczak raised the rating to hold from sell, keeping the per-share price target of $80, noting that even though the backdrop for the advertising market is tough, especially in light of Snap's (SNAP) recent results, a slowing economy, the TikTok threat and impacts from Apple's (AAPL) operating system changes, "TV spend would seem to be relatively better insulated here against these trends."
"In addition, a recession arguably could speed up the swap away from traditional PayTV to streaming," Wlodarczak added.
Roku (ROKU) shares gained more than 1.5% to $90.05 in premarket trading on Friday.
The downgrade in February was based on several data points, including "mixed" fourth-quarter subscriber results and guidance, a mature streaming market in the U.S., increased spending in 2022, as well as the potential for a recession and a cable company getting into streaming aggregation.
Wlodarczak pointed out that none of those concerns have been alleviated, but the "material decline" in shares has pushed Roku's (ROKU) valuation to a level the firm views as "reasonable."
Roku (ROKU) recently became the top holding in Cathie Wood's flagship ARK Innovation ETF (ARKK), with an 8.38% weighting.
Analysts have been overly bullish on Roku's stock (ROKU). It had an average rating of Buy from Wall Street analysts, and a less enthusiastic
BUY from Seeking Alpha authors. Conversely, Seeking Alpha's quant system, which consistently beats the market, rated Roku a STRONG SELL.