Roku rises as BofA cuts estimates going into Q3, as inflation, recession worries persist
Michael Vi

Roku (NASDAQ:ROKU) shares rose on Wednesday even as investment firm Bank of America cut its estimates on the streaming giant, citing worries about the supply chain, inflation and a potential recession.
Analyst Ruplu Bhattacharya, who has a buy rating and a $125 price target on Roku (ROKU) shares, lowered estimates to 6.4M net addition for the third-quarter, which the analyst said "would be the lowest annual account growth since 2017."
Regarding revenue, it's likely that Roku (ROKU) did not see a "material slowdown" in the quarter, but it's expected that advertising revenue will be choppy. Weakness from verticals such as automotive and consumer packaged goods will go up against strength in entertainment, travel, finance and insurance. 
Bhattacharya now expects $3B in revenue from platform sales in 2022 and $3.45B in total revenue, up 25% year-over-year, compared to guidance of 35% growth. 
The analyst noted that Bank of America is "concerned about the possibility of a recession in the U.S. which can slow advertising spend in [second-half of 2022] and [first-half of 2023]."
Roku (ROKU) shares rose slightly more than 3% to $82.44 in premarket trading. 
Despite the near-term worries, Bhattacharya noted that the long-term thesis "remains intact" as advertising dollars continue to shift to connected TV and Roku (ROKU) has an advantage with its OneView platform. 
There are concerns that Roku (ROKU) could see slowing growth as other streaming services add advertising, including Netflix (NFLX) and Walt Disney's (DIS) Disney+, but the "general" feeling is that these entrants will result in increased ad supply and not cause cost-per-thousand, or CPMs, to fall, Bhattacharya explained.
On Tuesday, Roku (ROKU) shares fell as investment firm Wolfe Research downgraded the media and communications company, citing worries that the company's "flywheel" is not as strong as previously thought.