Shares of Roku (NASDAQ: ROKU) tanked Wednesday as analysts continue to downgrade the company’s stock, pressured by worries over competitors and the general viability of the streaming industry.
Loop Capital analyst Alan Gould lowered his rating of the company from a “Sell” to a “Hold,” triggering a new wave of selling in the public markets as investors reacted. His target price for the company remained at $45 per share, a figure that’s well below other estimates such as FactSet’s, which puts the company closer to the $65 range.
“Roku has appreciated 131% since December 31, which compares with 33% for Netflix, 21% for the FANG stocks and 11% for the S&P 500,” Gould wrote in a note on Wednesday. “The market is looking for growth and Roku exhibits some of the highest unit and revenue growth of any of the high growth internet/media stocks.…However, the company faces substantial potential competition and we believe it is difficult to justify the valuation.”
Another analyst, Tim Nollen at Macquarie Research, also downgraded Roku’s shares from “Outperform” to a “Neutral.” Unlike Gould, he still maintains price targets near the $66 range but expects to see a move away from free streaming platforms to ones with more upsells. “Ad-supported video on demand will get more competitive, with services such as Viacom’s (VIA) Pluto TV, Amazon.com’s ad-supported channel, and a potential Apple video service to be announced March 25,” Nollen added. “Also, the addition of scaled streaming video on demand services from Walt Disney (DIS), Warner Media and NBCUniversal could limit the amount of library content made available to Roku Channel over time.”
Roku reported revenues of around $275.7 million and earnings of 5 cents per share last month, above analyst expectations. At the same time, most of the company’s key metrics had seen improvements, with the company’s average revenue-per-user increasing by 30 percent to $17.95 in the last quarter. Roku’s shares spiked 25.3 percent when this was announced, however, that didn’t stop analysts at the time from downgrading the company’s stock despite the positive figures.
Many experts look at the company with worry as it’s expected that even more businesses are going to begin providing streaming services. Shares of Roku dropped 14 percent in response to these analyst downgrades.
Roku Inc Company Profile
Roku, Inc. operates a TV streaming platform. The company operates in two segments, Platform and Player. Its platform allows users to discover and access various movies and TV episodes, as well as live sports, music, news, and others. As of December 31, 2018, the company had 27.1 million active accounts.
It also provides advertising products, including videos ads, brand sponsorships, and audience marketplace program; and manufactures, sells, and licenses TVs under the Roku TV name. In addition, the company offers streaming media players and accessories under the Roku brand name; and sells branded channel buttons on remote controls.
It provides its products and services through retailers and distributors, as well as directly to customers through its Website in the United States, Canada, the United Kingdom, France, the Republic of Ireland, Mexico, and various Latin American countries. The company was founded in 2002 and is headquartered in Los Gatos, California. –Bloomberg