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Roku Is Initiated at Overweight by J.P. Morgan

Roku shares climb as J.P. Morgan initiates coverage of the media-streaming platform with an overweight rating.
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Roku  (ROKU) - Get Roku Inc. Report is "well positioned as TV viewing increasingly shifts to streaming," according to a J.P. Morgan analyst who initiated coverage on shares of the media-streaming platform with an overweight rating and $475 price target.

Shares of the Los Gatos, Calif.-based company were climbing 6.63% to $435.37.

"Roku is the leading TV streaming platform in the U.S. by hours streamed," analyst Cory Carpenter said in a note to investors, "with about 51 million active accounts and users streaming nearly 60 billion hours of content in 2020."

The analyst said Roku is well-positioned as TV viewing increasingly shifts to streaming, which now accounts for about 30% of TV viewing time for 18-49 year olds in the U.S. and about 40% of viewing time for 18-34 year olds.

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"Our bull thesis is largely driven by what we believe to be Roku’s significant advertising opportunity, with only an estimated ~8-9% of TV ad budgets currently allocated to streaming, which significantly lags the shift in eyeballs," Carpenter said. "But similar to what we saw happen with digital ad budgets and mobile years ago, we expect the $s to follow the eyeballs."

The analyst forecast Roku's ad revenue growth of more than 48% for 2020-2023, "which is best in class among other high-growth online advertisers."

"We believe Connected TV will be one of the fastest growing ad mediums over the next five-plus years," Carpenter said. "We believe Roku’s scale and engagement are key competitive advantages and position the company well to capture the shift of ad dollars to streaming."

Home entertainment has surged during the coronavirus pandemic as consumers spend more time at home and film distributors release movies directly on streaming platforms.

Earlier this month, Rosenblatt Securities analyst Mark Zgutowicz raised his price target on Roku to a Wall-Street-high of $420 from $260 by a Rosenblatt Securities analyst.