By Sam Boughedda
Roku (NASDAQ:ROKU) shares were double-upgraded to Buy from Underperform, with the price target lifted to $85 from $45 per share at BofA on Friday.
Analysts told investors in a research note that the fundamentals for the company are bottoming out, and they are moving back to Buy as the company is on the path to revenue and margin improvement.
The analysts outlined several factors for the upgrade, including the company performing better than the broader advertising market which remains weak, ad spending across some verticals bottoming out, and new partnerships with media networks and DSPs improving access to advertisers.
"New rev streams will likely start to contribute with smart home initiatives (cameras, doorbells etc) and shoppable ads," the analysts added. "Est revisions should be positive post Q1 as macro improves and compares get significantly easier."
"Despite ongoing weakness in the ad market, Roku guided C1Q rev above Street. Platform margins were guided lower in the n-t on lower M&E revs (higher margin); but that should improve along with the overall Ad market," concluded the analysts.