Several Wall Street analysts rolled out coverage of Vizio (VZIO) on Monday, starting the stock with Buy-equivalent ratings. JPMorgan analyst Cory Carpenter believes SmartCast positions the company well to benefit from the shift of TV viewing and ad dollars from linear to streaming, while his peer at Roth Capital argued that Vizio is driving increasing engagement and monetization for advertising, subscription and other valued added services.
TV VIEWING SHIFT: JPMorgan analyst Cory Carpenter initiated coverage of Vizio with an Overweight rating and $30 price target, representing 25% upside potential. The analyst believes SmartCast positions Vizio well to benefit from the shift of TV viewing and ad dollars from linear to streaming. The company offers investors an attractive way to get exposure to the connected TV ad market, which is projected to grow from $9B in 2020 to $27.5B in 2025, Carpenter told investors in a research note.
Needham analyst Laura Martin also started coverage of Vizio with a Buy rating and $30 price target. The company represents a pure play way to play CTV ad growth, coupled with platform economics upside, the analyst told investors in a research note. Martin added that what she "likes most" about the company is that Roku (ROKU) created a template that Vizio can follow to rapidly accelerate its ROIC by adding 65% gross margin Platform+ revenue to Vizio's 5% gross margin Smart TV sales.
Additionally, Piper Sandler analyst Thomas Champion initiated coverage of Vizio with an Overweight rating and $29 price target. Vizio is a "defensible" hardware business transitioning to a higher-growth streaming and connected TV business, Champion contended. The analyst believes Platform+ should raise the margin profile of the business while attaching Vizio to the connected TV advertising total addressable market "with its many structural tailwinds." Further, he highlighted that Vizio's hardware products enjoy prominent shelf-space in retailers like Target (TGT) and Walmart (WMT), while the company's capital-light production model affords focus on innovation.
Also bullish on the stock, Roth Capital analyst Scott Searle started coverage of Vizio with a Buy rating and $29 price target. In combination with its "robust" SmartCast streaming platform, Vizio is driving increasing engagement and monetization for advertising, subscription and other valued added services, the analyst contended. Further, Searle noted that SmartCast remains in the early days of adoption and monetization which is expected to generate a 50%-plus CAGR through 2023.
Meanwhile, Wells Fargo analyst Steven Cahall initiated Vizio with an Overweight rating. The analyst believes Vizio is "uniquely" integrated between smart TV sets and its connected TV operating system, implying advantages to building an installed base of monetizable active users in the fast-growing CTV marketplace. His optimism is underpinned by growth in future ARPU, especially from advertising, which should accelerate Vizio's profit. His Platform+ target valuation at 250-times EV/SmartCast accounts is at an attractive discount to peers.
PRICE ACTION: In morning trading, shares of Vizio have gained almost 2% to $24.40
