Shares of Roku Inc (NASDAQ: ROKU) are down more than 10% on Wednesday after MoffettNathanson downgraded the stock, saying estimates are “too damn high”.
Michael Nathanson sees another 10% downside in Roku
In a note this morning, Michael Nathanson downgraded Roku to “sell” with a price target of $220 that represents another 10% downside on top of today’s slide.
Roku benefitted from the pandemic that restricted people to their homes, thereby accelerating a switch to streaming. In the second half of 2021, however, it has struggled to keep up as the COVID restrictions started to ease.
We think our and the Street’s long-term revenue and earnings estimates are just too damn high. It appears that Roku will need to monetise an absurdly high portion of long-tail AVOD impressions to come even close to Street numbers, which we think will be a challenge given rising competitive pressures in TV OEMs and operating systems.
Jim Cramer agrees with the bearish call
On CNBC’s “Squawk on the Street”, Jim Cramer also expressed his disappointment in the stock as he agreed with MoffettNathanson’s bearish call.
They call Nathanson the assassin. This was an amazing piece basically saying we’re all paying too much for Roku, don’t we realise there’s a rapid deceleration? I read this, and I said to myself, every time I look at Roku, I want to sell it. The deceleration that Nathanson outlines is pretty severe.
The deceleration saw Roku report lower-than-expected revenue for its fiscal third-quarter earlier this month. Its guidance for the holiday quarter also came in weaker than analysts’ forecast. Shares of the company have tanked nearly 50% since late July.
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