Roku, Inc.

Roku is witnessing a slow period as a significant slowdown is seen in TV advertising spending because of the macroeconomic environment that is pressuring the platform business growth of Roku in the short term. The company’s stock is trading close to its 52-week low and its results were significantly below market expectations on all fronts. However, the active accounts of the company and the TV advertising market share of the company continue to increase. Roku remains differentiated by its unique assets, proprietary Roku TV OS, innovative advertisement platform for connected TV, and The Roku Channel. In the quarter, the number of retailers temporarily lowered. Elevated inflation and recessionary fears caused the advertisers to pause or curtail their spending significantly in the scatter market, adversely affecting the company’s platform revenue growth. Because of the ongoing macroeconomic challenges, the company took steps in the quarter to slow both headcount growth and operating expense significantly. Given the current scenario, we provide the stock of Roku with a ‘Hold’ rating and a revision in the target price.