Roku Earnings: Strong Quarter, but We're More Skeptical of Long-Term Path; Fair Value Down 33%

Roku had a very good first quarter, with impressive user engagement driving strong revenue growth and EBITDA that is tracking better than our full-year forecast. Management tempered expectations a bit for the second half of 2024 but believes it is setting itself up for acceleration in 2025. However, we’ve taken a deeper look at Roku, and we’re concerned that its customer acquisition costs must remain elevated for the account base to continue growing at a healthy clip. We’re reducing our fair value estimate to $50 per share from $75 while maintaining our no-moat rating.