Citi Raises Roku Price Target to $77, Highlights Confidence in Revenue Growth

Citi analysts raised their price target for Roku (NASDAQ:ROKU) to $77 from $60, reflecting increased confidence in the company’s efforts to accelerate platform revenue growth. Despite maintaining a Neutral rating, Citi's new target signals optimism in Roku's future performance.

The updated price target is now based on a multiple of free cash flow (FCF), a shift from the previous valuation method that focused on enterprise value per subscriber (EV-sub). This change stems from Roku’s recent success in generating FCF, management's commitment to boosting cash flow, and expectations for stronger FCF generation going forward. Citi now values Roku at approximately 34 times its projected 2025 FCF, along with an additional $16 per share in net cash, leading to the new target price.

Roku’s shares have surged around 45% since its second-quarter earnings report in 2024, driven by growing investor confidence in the company’s strategic initiatives. These include increasing subscription revenue, improving ad fill rates through third-party Demand-Side Platforms (DSPs), and better monetizing the home screen.

Citi believes Roku is well-positioned to capture a larger share of the global digital video advertising market, with the consensus estimates appearing reasonable for future growth, excluding the unusual impacts seen during the COVID period.