Wedbush Resets Roku Valuation on 'Post-Pandemic Fade'; Sees Return of Discounts

Wedbush modeled Roku player gross margin at minus 25% in Q4 since the streaming platform provider didn’t pass through higher shipping costs to consumers: "Driving active account growth on each unit sale is far more valuable,” analyst Michael Pachter wrote Monday. Wedbush expects platform revenue of $750 million, a 59% year on year increase, on an estimated 3.1 million new users in the quarter. The estimated 16% Q4 subscriber growth is a “significant deceleration” from recent quarters, as Roku’s TV OEM partners “struggled to get TVs to market due to component shortages and supply chain disruption, coupled with consumers spending more time out-of-home as we exited” COVID-19 lockdowns, Pachter said. As the supply chain disruption eases, possibly midyear, Roku’s user growth will “reaccelerate alongside OEM and retailer discounting,” said the analyst. Wedbush expects average revenue per user growth to offset the shortfall in active account growth, “as Roku continues to gain share of digital marketing budgets.” Pachter maintained an “outperform” rating but reset the company’s valuation on “post-pandemic fade.” Roku reports earnings Thursday.