Truist Securities analyst Matthew Thornton upgraded Roku Inc. shares (ROKU) to buy from hold Tuesday, arguing that the stock's valuation is more "tenable" now and that the company has attractive opportunities ahead in advertising. He lowered his price target to $367 from $480 but said that Roku has pulled back to its two-year average on the basis of enterprise value to sales, helping make the stock more approachable from a valuation perspective.
Thornton sees the potential for gross-profit upside in Roku's platform business with a model that is above the consensus view on that metric for the first and second quarters of 2021, as well as the whole of 2021 and 2022.
Thinking more long term, he's also excited about the opportunities that could exist in e-commerce tie-ins that would let customers use their stored card credentials to buy items that they saw in shows or sporting events they watched through the Roku platform.
"We think ecommerce is a next-leg opportunity (TV advertising is the current-leg) and do not believe it is on most investors' radars yet," Thornton wrote.
Roku shares are up 4.28% in Tuesday morning trading. They've lost 10% over the past three months as the S&P 500 has gained 6%.
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