Roku, Inc.

ROKU Details

Roku, Inc. (NASDAQ: ROKU) operates as aTV streaming platform in the United States. Its website allows users to explore and access a wide choice of movies and TV episodes, as well as live sports, music, news, and more. Advertising, content distribution, audience building, and billing services contribute to platform revenue, while player revenue comes from selling streaming players and audio products.

Latest News:

• DCR Integration: On October 26, 2021, Roku and Nielsen, a global leader in audience measurement, data, and analytics, announced that beginning in October 2021, publishers will be able to use Nielsen Digital Content Ratings (DCR) to measure channel content on Roku devices. DCR provides deduplicated reach and demographic statistics for Roku channels, allowing users to determine which content reaches the correct audiences.
• SEMP TCL Collaboration: On September 30, 2021, SEMP TCL, a pioneer electronics company in Brazil, announced a partnership with ROKU. In addition, TCL will expand its global partnership with Roku by bringing TCL Roku TV models to Brazil later this year, and a brand-new portfolio of SEMP Roku TV models the following week.

Q3FY21 Results:

• Expansion in Topline: The company reported YoY growth of 50.54% in total net revenue to USD 679.95 million in Q3FY21 (ended September 30, 2021) compared to USD 451.66 million in Q3FY20.
• Surge in Profitability: Net income for Q3FY21 grew 432.44% YoY and stood at USD 68.94 million compared to USD12.95 million in Q3FY20.
• Cash and Debt Position: As of September 30, 2021, the company's cash balance stood at USD 2.18 billion, with a total debt of USD 91.09 million.
• Growth in ARPU: ROKU's average revenue per user (ARPU) increased to USD 40.10 as of September 30, 2021, up from USD 27.00 as of September 30, 2020.

Key Risks:

• Seasonality Risk: Due to more lavish consumer spending and more advertising during the holiday seasons, ROKU's sales and gross profit are frequently most impressive in the fourth quarter of each fiscal year, accounting for a significant share of the entire net income for that fiscal year. Therefore, any failure in expected fourth-quarter sales, whether due to a reduction in the effectiveness of its promotional operations, supply chain disruptions, or other factors, would substantially influence its full-year performance.

Outlook:

• Q4FY21 Estimates: ROKU expects its Q4FY21 total revenues to be around USD 885-900 million, along with a total gross profit to be in the range of USD 380-390 million.

Q4FY21 Guidance (Source: Q3FY21 Shareholder Letter, November 03, 2021)

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

ROKU Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

ROKU share price has fallen 35.68% in the past nine months and is leaning towards the lower end of its 52-week range of USD 207.50 to USD 490.76. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 31.48. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 350.18.

Considering the significant correction in the stock price in the past nine months, strong balance sheet, high profitability margins, recent partnerships, and current valuation, we recommend a "Buy" rating on the stock at the current price of USD 279.40, up 0.28% as of November 08, 2021, 10:27 AM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

Zimmer Biomet Holdings, Inc,

ZBH Details

Zimmer Biomet Holdings, Inc. (NYSE: ZBH) is engaged in developing, manufacturing, and marketing orthopedic reconstructive goods such as sports medicine, biologics, extremities and trauma products, and other related items. The company’s product line is divided into two categories, namely, Knees and Hips.

Latest News:

• Key Appointments: On September 14, 2021, ZBH announced a number of key leadership appointments to the "NewCo" executive team, including Richard J. Heppenstall as Executive Vice President and Chief Financial Officer (CFO). According to ZBH, the Spine and Dental enterprises would be spun out under the name ZimVie. In February 2021, ZBH also declared its intention to form a new independent, publicly listed company in order to effectively allocate resources and attain market leadership. The transaction is still on track, with a completion date set for mid-2022.

Q3FY21 Results:

• Flat Topline: The company reported a YoY decline of 0.27% in net sales to USD 1.92 billion in Q3FY21 (ended September 30, 2021) compared to USD 1.93 billion in Q3FY20.
• Decline in Profitability: Net income for Q3FY21 reduced 39.96% YoY and stood at USD 145.6 million compared to USD 242.5 million in Q2FY20.
• Cash and Debt Position: As of September 30, 2021, the company's cash balance stood at USD 919.60 million, with a total debt of USD 7.50 billion.

Key Risks:

• Dependence on Third-Party Payers: ZBH offers its products and services to hospitals, doctors, and other healthcare providers who are reimbursed for the healthcare services they give to their patients by third-party payors such as domestic and international government programs, private insurance plans, and managed care programs. As a result, if third-party payors in government healthcare systems refuse to compensate their customers for the items or reduce payment levels, demand for ZBH's products may fall, which could harm its financials.

Outlook:

Financial Guidance (Source: Q3FY21 Earnings Release, November 04, 2021)

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

ZBH Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

ZBH' share price has fallen 20.0% in the past six months and is currently leaning towards the lower end of its 52-week range of USD 136.69 to USD 180.36. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 38.09. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 171.19.

Considering the significant correction in the stock price, strong track record, constant dividend yield, associated risks, and current valuation, we recommend a "Buy" rating on the stock at the current price of USD 137.56, down 2.89% as of November 08, 2021, 12.42 PM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.  

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.