Roku Shares Look to be Fairly Priced, Says Citi

Roku stock has been one of the standout performers this year, more than doubling despite concerns about a weak advertising market. However, according to analysts at Citi, the streaming-media company's shares now appear to be fairly priced.

In Roku's latest earnings report, the company surpassed expectations and expressed optimism about the recovery of the advertising sector. This positive news contributed to a boost in the stock's value.

Citi, while lowering its rating on the stock from Buy to Neutral, raised its price target from $75 to $100. The analysts at Citi believe that even with faster revenue growth, it may not be enough to drive the stock higher given its recent gains.

At the time of writing, Roku shares had dipped by 2.1% to $89.30 in premarket trading on Thursday.

Citi's analysts stated, "If Roku can regain its historical share gains, we anticipate a return to approximately 20% revenue growth. However, considering the stock's significant rise, we believe much of this potential growth is already reflected in its valuation."

Although Roku primarily sells video-streaming hardware and licenses its operating system to TV manufacturers, the majority of its revenue comes from advertising. The stock initially took a hit in 2022 due to concerns about tighter advertising budgets caused by high inflation and interest rates. Nevertheless, in recent months, it has experienced a remarkable surge.

The Citi analysts added, "We are observing a moderating fear of recession, and investors are increasingly optimistic about the possibility of a soft landing. This growing confidence lends support to the notion that Roku's revenue growth will pick up speed in 2024."