Roku set for growth from CTV and international expansion, says Berenberg

Video device and software giant Roku should stand to benefit from global growth in connected TV and its expansion into Europe and Latin America should double the addressable market for connected TV advertising, according to Berenberg.

Delivering a bullish assessment of Roku’s prospects, Berenberg analyst Sunil Rajgopal said that despite a decline in Roku’s growth and lower-than-expected EBITDA guidance, the tech provider’s investment in its operating system, ad tech platform and Roku Channel, Roku should benefit from a recover in TV panel sales and should return to growth, with a prediction of 28% top-line CAGR growth between 2021-24.

“Roku’s superior platform connected TV (CTV) ad-spend gap and international expansions should help drive robust top-line growth,” said Berenberg.

The bank said that connected TV now accounts for between 25-50% of TV viewing across a range of markets, but accounts for only 3% of digital advertising and 8% of overall TV ad spend.

As more advertising switches to CTV, Roku, with a 30% share of streaming hours in the US, should stand to benefit.

“Roku’s expansion in Europe and LatAm should nearly double the addressable market. We note that Roku is also boosting its ad-tech business in Canada, the UK, and Mexico; results from these initiatives should become visible in the coming quarters,” Berenberg added.

Describing current valuations of the company as “too pessimistic”, Berenberg said that growth in revenue would primarily be driven by “improving monetisation of Roku’s existing user base’, reducing the need for continue high operating expenditure.

Reducing its price target for the company following the lower guidance, Berenberg maintained a buy recommendation for its stock.

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