Streaming has become quite the competitive business over the past few months as ever more tech companies look to transition into this space. Companies like Roku (NASDAQ: ROKU) have done well for themselves, but the increasing competition has sent shares floundering. In response, one analyst has suggested that the stock could fall by 45% in the near future.
Jeff Wlodarzcak, an analyst at Pivotal Research, wrote in a note to clients on Friday titled “Is Roku Broku?” where he began covering the stock for the first time and issued a “sell” rating.
Following news from both Facebook and Comcast that they would be releasing competing streaming devices, shares of Roku took a big hit in response to the news. While a good number of analysts remain bullish on the stock, Wlodarzcak has exactly the opposite opinion.
“We see dramatically more competition emerging that will likely drive the cost of OTT devices to zero and put material pressure on advertising revenue splits, highlighted by Comcast’s recent moves with its free Xfinity Flex product that is likely to be copied by other distributors,” wrote Wlodarzcak. “While Roku management deserves credit for the asset they have created, everyone has realized the living room is too important and the big boys…with massive leverage are likely to make Roku growth much more difficult,” he added.
Last week, Comcast announced they would be providing a free Xfinity Flex streaming box to their internet-only subscribers instead of charging the typical $5 per month they normally charged.
At the same time, Facebook also announced last week that their newest product, the Portal TV, is available for purchase and would begin shipping in early November. All of these are just the beginning, as other companies like Disney and Apple have launched their own respective streaming services in an effort to gobble up a share of this highly lucrative market.
Shares of Roku fell by another 19.2% on Friday, extending what has already been a traumatic weekly decline for the cloud-streaming platform. Last Wednesday saw the stock plummet another 15.4% within the span of 24 hours, which was already one of the largest single-day drops in the streaming company’s history.
With an ever-increasing number of competitors entering the market, time will tell whether or not Roku will stage a recovery. However, it’s clear that the sentiments surrounding the stock have changed significantly for the worse.
Roku Company Profile
Roku Inc operates TV streaming platform in the United States. Its TV streaming platform allows users to discover and access a variety of movies and TV episodes, as well as live sports, music, news, and others. The operating segments of the company are Player and Platform.
It derives key revenue from the Player segment which consists of net sales of streaming media players and accessories through retailers and distributors, as well as directly to customers through the company’s website. Platform segment consists of fees received from advertisers and content publishers, and from licensing the company’s technology and proprietary operating system with TV brands and service operators. – Warrior Trading News
