By Mackenzie Tatananni

While Roku has secured its position as the top streaming platform in the U.S., it still has further room to grow, JMP Securities analysts argued as they initiated coverage on the stock.

Shares of the technology company jumped 7.3% to $81.42 as analysts led by Matthew Condon rated Roku at Outperform and set a price target of $95, suggesting a potential upside of 17%.

The company offers an operating system as well as Roku-branded streaming devices. Its flagship Roku Channel provides a gateway to free, ad-supported television, or FAST TV.

Condon noted Roku boasts the leading TV operating system in the U.S., while the The Roku Channel is the number-three app on its platform by streaming time, according to Nielsen data.

The company surpassed 90 million global streaming households this month and is approaching coverage of half of all U.S. broadband households.

Roku is enhancing integrations with third-party ad-buying platforms, Condon wrote, citing partnerships with The Trade Desk and FreeWheel as examples.

The analyst believes Roku is poised to benefit from an ad spend shift to connected TV, a term describing devices that connect to the internet to stream video.

While 42% of U.S. TV viewing time is attributed to streaming, only 22% of TV ad spend is allocated to connected TV, Condon said, attributing the disparity largely to live sports.

As streaming platforms continue to acquire sports rights, "we expect viewership and ad dollars to increasingly transition to streaming," Condon wrote.

Importantly, near-term competitive concerns are overdone, in the analyst's view. While Walmart's acquisition of Vizio and the coming launch of The Trade Desk's Ventura OS prove that competition in the TV OS market is intensifying, Condon believes Roku's low-cost hardware and user-friendly interface are key differentiators.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com

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January 21, 2025 13:59 ET (18:59 GMT)

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