Netflix, Spotify and Roku in spotlight as Jefferies weighs in on interactive media
Wachiwit

In a wide-spanning note on Thursday, investment firm Jefferies made several ratings changes on the interactive media sector, with upgrades of Netflix (NASDAQ:NFLX), and ratings cuts for Spotify (NYSE:SPOT), Roku (NASDAQ:ROKU) and others.
On Netflix (NFLX), analyst Andrew Uerkwitz upgraded the stock to buy from hold, and said that the company's new ad-supported subscription tier "will be slow to kick in". However, Uerkwitz said that when that new option, and upcoming password-sharing changes gain traction, the moves "should drive top line outperformance." 
Uerkwitz added that Netflix (NFLX) could see gains in its operating margins in 2024, as content writeoffs are "flattish," along with better revenue growth and operating leverage. 
With regards to Roku (ROKU), Uerkwitz downgraded the company's shares to underperform from hold, and cut the stock's per-share price target to $30 from $45, noting that a potentially lower ad market is not yet reflected in estimates. 
Uerkwitz said that he doesn't believe that a significantly slower digital ad market is currently reflected in the near-term consensus expectations and also "the [long-term] trajectory of the business remains unclear." Uerkwitz added that Netflix (NFLX) and Disney's (DIS) Disney+ streaming services are expected to keep the "majority" of incremental connected TV ad spending in 2023 and 2024, with the rest of the industry growing low single digits.
Uerkwitz cut his rating on Spotify (SPOT) to hold from buy, noting that the company's audio convergence, combining music, podcasts, audiobooks and "fandom" is leading to better margins, but it's happening "much slower than expected."
"We donât see gross margins returning to 2021 levels until 2024 and above 30% well beyond that, Uerkwitz wrote in a research note. "Until we see signs of a reacceleration, weâll move to the sidelines."
Unity Software (U) also went to the chopping block, as Uerkwitz downgraded the 3D content platform developer to underperform due to its current valuation.
Netflix (NFLX) said on Wednesday that it would live-stream the Screen Actors Guild Awards show on its service, starting in 2024.
Analysts are largely cautious on Netflix (NFLX). It has a HOLD rating from Seeking Alpha authors, while Wall Street analysts rate it a BUY. Conversely, Seeking Alpha's quant system, which consistently beats the market, rates NFLX a HOLD.