Roku Shares Jump 7% as Analyst Predicts Engagement, Economics to Improve in 2025

Roku shares climbed over 7% during Wednesday’s trading session after Guggenheim Securities maintained a buy rating on its stock, citing “high conviction” that the company would see continued improvements in engagement and economics in 2025 and “exit the year at its strongest.”

“Management’s platform monetization efforts, driven by chief financial officer Dan Jedda and Roku Media president Charlie Collier, are laser-focused on growing the financial contribution from the company’s 90 [million] streaming households,” the firm’s analyst Michael Morris wrote in a note to clients. “Specifically, we believe actions including improved focus on monetization-based operating metrics, broadening third-party partnerships and expanding revenue-generating offerings while incrementally focusing on profitability and free cash flow generation are driving a more valuable enterprise.”

Though Roku previously said it would no longer report streaming households on a quarterly basis, Guggenheim anticipates it will have over 92 million homes globally and over 65 million domestically by the end of the first quarter. It also noted that Roku is now in more than half of roughly 120 million domestic broadband homes and believes it is in over 40% of more than 25 million broadband homes in Mexico.

“We expect the company will be approaching 100 [million] streaming households by the end of 2025,” Morris added.

He further estimated that non-U.S. homes account for roughly one-third of Roku’s total streaming households, but that the revenue generated from them accounts for a “low-single-digit percentage” of segment revenue, generated primarily by transaction and subscription on-demand sign-ups and limited display advertising sales.

“We believe that international markets, particularly in Canada, the United Kingdom and Latin America, have similar appetites for free, ad-supported streaming content,” Morris said. “We expect Roku to work toward incremental monetization of its ~28mm international streaming households (and growing) in 2025 and anticipate expanded contribution to economics to begin in 2026.”

Meanwhile, Guggenheim predicted that The Roku Channel would see its highest rate of advertising inventory growth over the next three years, followed by sales of advertising inventory on other applications. The service accounted for a 2.1% share of TV viewing in February, per Nielsen, making it the fifth-largest streaming platform.

It expects display advertising to return to growth in 2025 after contracting in 2023 and ’24. The firm also forecasts further growth in streaming service distribution revenue, but at a slower rate than advertising, and sees Roku Pay as an “early-stage incremental driver of growth going forward.”

Looking ahead, Roku is “well-positioned” to reach its 2026 operating profit goal through a combination of sustained double-digit revenue growth and cost discipline, including mid-single-digit operating expense growth, Morris said. The firm forecasts the company will generate free cash flow of roughly $350 million in 2025 and operating income of $77 million and free cash flow of $550 million in 2026.

Despite maintaining the buy rating, Morris said Guggenheim would lower its 12-month price target on the stock from $115 to $100 per share, based on “the contraction in the relative peer multiple.”

Shares of Roku are up 11% in the past year, but are down 7% in the past six months and 3.5% year to date.

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