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With shares of Roku Inc (NASDAQ: ROKU) now trading at about half the price they were in mid-February, Loop Capital raised its rating on the streaming platform company, but lowered revenue estimates with an assumption that the sudden economic upheaval will lead to a drop in advertising.
The Roku Analyst
Alan Gould upgraded Roku from Sell to Hold with a $68 price target.
The Roku Thesis
Gould assumes Roku's platform revenue will take less of a coronavirus hit than many media companies, but said channel checks show advertising is likely to decline.
The outlook for growth remains, however, with Gould saying it may even get a boost as Americans stream more hours of content in quarantine.
"Assuming the economy rebounds by the fourth quarter, we estimate platform revenue will still continue to show impressive growth," Gould wrote in the note, though he said the rate of growth could slow considerably, possibly to as low as 45% in 2020 from an estimated 73% last year.
The lower price of the stock is good, he said, noting the stock has dropped about in half since February.
Gould lowered his first-quarter revenue estimate to $292 million, below the $300 million lower end of guidance. He said the second quarter will be the toughest for advertising, with recovery beginning in the third quarter.
ROKU Price Action
Investors were also showing strong interest in Roku on Thursday, with shares up more than 8% to $73.11.
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