Roku stock fell ~6%
Roku (ROKU) shares fell nearly 6% on April 4 to $64.49 after an analyst downgraded the stock. Guggenheim analyst Michael Morris cut Roku’s rating to “neutral” from “buy.” He also cut the target price to $72 from $77. On the same day, Morris upgraded Facebook (FB) to “buy” from “neutral.”
Roku shares have grown significantly. The shares have more than doubled year-to-date as of April 4. The company also reported upbeat earnings and revenue results and strong revenue growth of 46.4% YoY (year-over-year) to $275.7 million in the fourth quarter. Roku aims to generate $1 billion in revenues this year due to its core operating metrics like active accounts, streaming hours, and average revenue per user.
Despite strong growth prospects, Morris downgraded Roku stock. He thinks that Apple’s streaming service, which was unveiled on March 25, might pose a threat to Roku’s user base. Roku added 7.8 million active accounts with a total user base of 27 million in 2018. The growing competition from Amazon (AMZN) and Viacom (VIAB) in the advertising video on demand market will likely hurt Roku’s advertising business. Morris was concerned after Roku’s CFO, Steve Louden, sold his 100,000 shares last month.
Last month, Roku was hit with two downgrades from Loop Capital and Macquarie due to concerns about intensifying competition in the streaming space and its struggle in the advertising business.