Roku's stock is up 150% so far this year, and this new bull sees further gains

By Emily Bary

Cannonball Research turns bullish on Roku shares

Even if the advertising market doesn't improve, Roku Inc. shares could be primed for gains.

That's the view of Cannonball Research analyst Vasily Karasyov, who upgraded Roku's stock (ROKU) to buy from neutral over the weekend. While Karasyov doesn't necessarily expect the advertising market to get better, he said he sees the potential for 2024 Wall Street expectations to move higher nonetheless.

"Estimates for [fiscal 2024] appear to be doable with room for upside if trends don't deteriorate," Karasyov wrote.

Read: Shopify's stock charges up after an 'epic' Black Friday

His 2024 platform revenue expectations are about in line with the consensus view of $3.2 billion, and his own model "implies video advertising revenue growth of 17.5% and other platform revenue (distributions and [media and entertainment]) declines of 7.7%." Those assumptions could prove conservative, though, if macroeconomic conditions don't worsen severely.

Weakness in media and entertainment ad spending has weighed on Roku lately, but Karasyov sees upside potential there. "The strikes in Hollywood are over which should not only help the reported numbers but improve the Street's conviction in the outlook," he noted.

See also: Trade Desk's stock selloff could be a buying opportunity -- or more reason for ad jitters

Plus, Roku stands to benefit from price increases conducted by streaming providers.

He now has a $116 price target on the stock, which is up about 8% in afternoon trading Monday. Shares have exploded about 150% higher so far this year, as the S&P 500 SPX has gained 19%.

-Emily Bary

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11-27-23 1522ET

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