Morgan Stanley analysts have maintained their bearish outlook on Roku (NASDAQ:ROKU), despite the company’s earnings exceeding expectations. In a note released on Friday, they reaffirmed their Underweight rating and set a price target of $60 per share for the stock.

The bank’s pessimistic view on Roku is based on its belief that the company’s revenue and gross profit growth outlook remains below consensus. They argue that these growth projections are “too modest to generate meaningful GAAP earnings over the next several years.”

Despite their bearish stance, analysts acknowledged the potential for significant upside to Roku shares if the company can successfully accelerate its platform revenue growth by 2025. This acceleration could be driven by recent strategic shifts, including leveraging third-party DSPs for additional advertiser demand, introducing new ad formats on the home screen, and expanding subscriptions.

However, Morgan Stanley also highlighted the risks associated with this acceleration. They pointed out the challenge of rapidly growing connected TV (CTV) ad supply from competitors like Prime Video and Netflix, as well as Subscription Video On Demand (SVOD) platforms’ efforts to avoid or reduce distribution fees.

Overall, while acknowledging Roku’s potential for growth, Morgan Stanley remains cautious about the company’s ability to achieve significant profitability in the near term and believes that the risks associated with its growth strategy warrant a bearish rating.