Roku shares were rising 5.75% to $131.41 in trading Monday.
RBC is modeling Roku's fourth-quarter revenue at $392 million, which is at the high end of the company’s own guidance between $380 million and $396 million. Wall Street has a consensus revenue estimate of $391.6 million.
That estimate is based on RBC’s model of a 30% year-over-year increase in fourth-quarter active accounts to 35.2 million. However, the firm does see a deceleration in 2020 hours streamed after an expected jump of 61% year over year in the fourth quarter and a 66% increase in the third quarter.
RBC identifies three key levers for the company’s growth strategy including:
- Growing active accounts through compelling TV streaming service
- Increasing user engagement to increase total hours streamed by making it easier for users to discover content
- Continuing to enhance the monetization capabilities to improve average revenue per user
The firm noted that Roku’s primary competition comes from global tech platforms and network streaming services that continue to invest in new offerings. This could lead to Roku seeing slower than expected ad-supported streaming hours growth. The downside case for Roku in this scenario is $96 a share.
On the other hand, the upside scenario sees increased streaming hours growth which would likely lead to better-than-expected advertising revenue. In the bull case, RBC has a price target of $200.