Shares of Roku (ROKU, Financial) surged 5.43% in the pre-market session today following an upgrade by Wolfe Research.
The analyst upgraded Roku from Peer Perform (Hold) to Outperform (Buy) and set a price target of $93. This upgrade suggests a potential 25% upside from the pre-upgrade trading price. The analyst cited increased focus on monetization and expected acceleration in connected TV ad sales as key factors supporting the upgrade.
Currently, Roku (ROKU, Financial) is priced at $73.96 per share. The company's market capitalization stands at $10.7 billion. Roku's GF Value is $86.87, suggesting that the stock is modestly undervalued. For more detailed information, you can visit the GF Value page.
Roku's financial strength is reflected in its Altman Z-score of 3.92, indicating robust financial health. Furthermore, the Beneish M-Score of -3.57 suggests that the company is unlikely to be manipulating its financial statements.
However, there are some cautionary indicators. The company has a medium degree of insider selling with no insider buying over the past three months, which includes four insider selling transactions amounting to 16,262 shares. Additionally, Roku's asset growth rate at 49% per year is outpacing its revenue growth rate of 29.5% over the past five years, indicating potential inefficiencies.
Despite these concerns, Roku's cash flow generation remains strong. The company boasts a free cash flow margin of 8.55% and a cash-to-debt ratio of 3.28, which is a positive signal for liquidity and financial stability. Moreover, its growth potential remains promising with a 13.8% revenue growth rate over the past year.
Investors should also take note that Roku operates in a competitive space among companies like Netflix (NFLX), Disney (DIS), and Warner Bros. Discovery (WBD). Nonetheless, the company's position as the top streaming operating system in the US, reaching more than half of broadband households, provides a solid competitive advantage.
