It’s hardly news for anyone keeping a tab on stock market trends but the majority of growth-oriented stocks, which benefited immensely in the pandemic era, have come crashing down hard in 2022’s bear market.
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Prime example: Roku (ROKU). The streaming giant is still a big name but nowhere near as highly valued as in prior years, considering the share price has retreated by 77% since the turn of the year.
However, mercifully 2022 is almost done and dusted, and looking forward to next year, Oppenheimer analyst Jason Helfstein thinks Roku stock is readying itself for a comeback.
The 5-star analyst believes the shares will “see an inflection in 1H:23 based on: 1) expectation new President of Media, Charlie Collier, ex CEO of FOX Entertainment, will open ad inventory to 3P Demand Side Platforms (DSPs), such as Trade Desk and Google; 2) increasing ad rates through higher biddable demand by giving brands better frequency capping and targeting; and 3) we expect Roku to begin re-selling a very small % of new AVOD services (Netflix/Disney+/HBOmax) as compensation for being supported on the platform.”
While the company has been reluctant in the past to consider integrating 3P DSPs, Helfstein says recent comments by the company compared to those made in past earnings calls on the matter show that it is “shifting its position.”
And by 3P DSP integration, based on the noises made by The Trade Desk during its Investor Day, CPM (cost per thousand) pricing could see a 40% “uplift,” and that is a conservative estimate, says Helfstein.
3P DSP integration could have other benefits too. By 2026, eMarketer anticipates US CTV will capture 42% of TV ad spend – up from 21% in 2021. Although since its 2021 peak, Roku has been losing US CTV market share, the analyst thinks 3P DSP integration “reverses this trend.” This runs counter to the bear thesis, which argues SVOD launches were just a “one-time pandemic” boon for the company.
All told, Helfstein maintains an Outperform (i.e., Buy) rating on ROKU shares, backed by a $70 price target. Should the figure be met, investors will be sitting on returns of 34% a year from now. (To watch Helfstein’s track record, click here)
Most on the Street aren’t quite as optimistic; the analyst consensus rates this stock a Hold (i.e. Neutral), based on 7 Buy ratings, 9 Holds and 4 Sells. (See Roku stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
