Citi has raised its target price for Roku (ROKU) to $77 from $60, maintaining a "Neutral" rating, as the stock trades at $76.26 as of September 24. The increase is driven by growing confidence in Roku's initiatives to boost Platform revenue, including a stronger focus on subscription revenues, improved ad fill rates through third-party DSPs, and enhanced home screen monetization. Citi's revised valuation is based on a 34x 2025 FCF multiple, reflecting Roku's recent free cash flow generation and robust net cash position, adding approximately $16 per share.
Citi notes that consensus estimates, which suggest Roku will capture a larger share of global digital video ad spend, appear reasonable. The firm estimates Roku needs to achieve around 9 million new subscription sign-ups or a 9% improvement in ad fill rates to meet these expectations. "We believe the firm will be able to deliver on consensus estimates through a combination of incremental subscription revenue and increased fill rates," Citi states.