Roku
has been a market darling this year but the stock’s steep rise is beginning to make analysts wary. Shares of the streaming-media company fell on Monday as Seaport Research became the second firm to downgrade Roku stock in a matter of days.
Seaport’s David Joyce downgraded Roku stock to Sell from Neutral, with a $75 target price. Growth from here is set to get more difficult for Roku, he argued.
“Roku’s advertising growth has been facing growth challenges from streaming behemoths Disney+ and Netflix launching ad tiers, from the broader Media & Entertainment spending pullback, and from the softer upfront and scatter market that reacted to last season’s trends,” Joyce wrote in a research note.
Roku could be facing trouble on two fronts for its advertising business, according to Joyce.
Netflix
and
Disney’s
advertising-supported streaming plans offer alternative places to put ads. Meanwhile, there could be softer spending on media-and-entertainment advertising as the lingering effects of Hollywood strikes reduce the availability of attractive new content for some time during 2024.
Roku shares were down 0.5% at $95.42 in early Monday trading. That only puts a small dent in the stock’s progress this year far, with shares having more than doubled.
However, the rating shift comes hot on the heels of another downgrade to Sell for the stock from analysts at MoffettNathanson last week, who also cited the threat from bigger players taking market share in advertising.
“We think 2024 may be the tipping point for Roku…to show [its] growth strategy can be done while making money,” CFRA analyst Kenneth Leon wrote in a recent research note previewing media trends for the year ahead.
Write to Adam Clark at [email protected]
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