Roku Ad Forecast Lowered

Roku is estimated to see more modest advertising growth in 2024 of 7% to $2.1 billion -- down from a previous 13% projection, according to Morgan Stanley Research.

Morgan Stanley Research estimates 2025 ad revenues will rise to $2.3 billion in 2025 and $2.6 billion in 2026, with an overall 11% compounded annual growth rate from 2023 through 2027.

The big streaming distribution platform is now estimated to grab around 45% of its overall platform revenues from all its advertising revenues -- Roku's video advertising on the platform as well as advertising on The Roku Channel.

The Roku platform also benefits from display advertising on the home screen.

Morgan Stanley estimates overall platform revenues for 2024 to hit $3.3 billion in 2024 and rise to $3.7 billion in 2025.

Ben Swinburne, media analyst at Morgan Stanley, says the company sees "an increasingly competitive CTV advertising market, and risk to medium-term platform segment gross profit expectations." 



In addition to advertising revenue, the other major source of revenue for Roku platform business comes from revenue sharing of subscription fees from streamers.

Looking at just its video advertising --  in an analysis of the company's 10K filing -- Swinburne estimates that video advertising slipped 1% from 2022, when it witnessed an 11% increase. 

Swinburne estimates a 4% rise in video advertising this year --- improving 5% in 2025, 7% in 2026, and 9% in 2027.

One of Roku's growing competitors is Vizio. Walmart announced it would be buying the smart TV manufacturer for $2.3 billion, and now Vizio is projected to see ad revenue improve by 22% to $379.3 million in 2024.

Swinburne sees video advertising revenue as a bigger of its advertising mix for Vizio-- although it came in at lower profit margins than other Vizio platform businesses.

Roku stock market shares, which rose since mid-February on the news that Walmart was buying Vizio Holdings, have dropped 30%. 

According to analysts, the market assumed that WalMart in its stores would now be pushing sales of more Vizio devices -- including TV sets -- over Roku's set-top boxes, TV sets, and streaming sticks, due to the acquisition.

But Morgan Stanley believes that because Roku products remain top sellers at the retailer, there will not be much initial change. 

Mid-day Friday morning showed Roku stock price was down 2% on the day to $59.02, while Vizio Holdings was down 0.2% to $10.88.

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