Citi has updated its model for Roku, Inc. (ROKU), maintaining a "Neutral" rating while adjusting the target price from $77 to $70, reflecting a valuation of approximately 34x 2025 free cash flow. Roku's Q3 2024 results exceeded consensus estimates for revenue, adjusted EBITDA, and net additions, prompting the company to guide Q4 2024 revenue at $1,140 million, gross profit at $465 million, and adjusted EBITDA at $30 million. The current stock price is $65.70 as of November 1, 2024.
Citi's revised outlook considers Roku's strong growth profile and market share in the U.S. connected TV ecosystem, yet sees the risk-reward as balanced at current levels. "At prevailing levels, we view the risk-reward as relatively balanced," Citi notes, highlighting the potential for revenue re-acceleration through company initiatives. However, the report also outlines risks, including potential declines in active account growth or broader ad market contractions.