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Analysts highlighted concerns clouding Roku, Inc's (NASDAQ: ROKU) prospects in the current environment.
Raymond James analyst Aaron Kessler initiated coverage of Roku with a Market Perform rating and no price target.
He expressed optimism over Roku's fundamentals citing that connected TV reach has surpassed linear TV, with advertising budgets expected to follow.
Kessler noted that Roku is well positioned as the market-leading TV operating system in North America with a proven strategy to grow internationally.
Roku's focus on the product and experience drives account and advertiser growth.
Kessler expects long-term revenue growth driven by the shift in video ad budgets to CTV, improved advertising monetization, and account growth driven by international. He expects EBITDA margins long-term driven by gross margins and Roku's proven EBITDA margins in 2021.
However, Kessler believes macro headwinds could impact the company's advertising business, and margins will be under pressure as the company accelerates investments.
Wolfe Research analyst Peter Supino downgraded Roku from Peer Perform to Underperform with a $77 price target.
The company's net subscriber additions and average revenue per user "face mounting challenges," Supino noted.
Supino cut his 2022 net add estimates to reflect the falling conversion of hardware sales to new accounts, ongoing supply chain constraints, and inflationary pressure on consumer spending.
Roku is in a "catch-22" between investing now to set up future global expansion and content acquisition opportunities or scaling back investments until the macro pressures abate, Supino added.
Price Action: ROKU shares traded lower by 6.92% at $80.71 on the last check Tuesday.
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