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Why Roku Stock Fell More than 7% on May 28

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Roku stock fell over 7% after a stellar run

After more than tripling this year, streaming device maker Roku (ROKU) plunged 7.2% on May 28. The company’s recent rally has given it a market valuation of over $10 billion despite its fall on May 28.

Investors have rewarded the stock this year as the company continues to see robust growth, mostly on the back of its ad and licensing business.

However, analyst Kyle Evans from investment bank Stephens downgraded his rating on ROKU from “overweight” to “equal weight” recently, giving it a price target of $84. The analyst cited near-term risk after the stock soared to a high of $95.95—nearly seven times its IPO price of $14. The company went public in September 2017.

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Roku is on track to hit $1 billion in revenue this year

The company is on track to reach its goal of $1 billion in revenue this year. It made $206.7 million in revenue during the first quarter, a rise of 51.3% YoY (year-over-year). The company’s revenue from ads and licensing, which now makes up most of its total revenue, rose 79% YoY in the first quarter, while its hardware revenue rose only 18% YoY.

However, the investment bank remains “very positive on Roku” in the long term, as Roku aims to boost its ad revenue even further. The company recently launched a new analytics tool to attract more advertisers to its platform.

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