BUZZ-Roku falls as Wells Fargo downgrades to "underweight" on shifting competitive landscape
Roku's stock fell 2.5% after Wells Fargo downgraded the streaming-device provider to "underweight". The brokerage cited the acquisition of Vizio by Walmart as a significant risk, leading to a decrease in net adds for Roku. Additionally, competition from heavyweights like Netflix and Amazon has impacted Roku's stock, which has dropped 32% since February 15. The current rating on Roku is "hold" with a median price target of $81.
** Roku Inc’s (ROKU.O) stock down 2.5% at $62.73 premarket after Wells Fargo downgrades streaming-device provider to “underweight” from “equal weight”, saying it thinks Walmart’s (WMT.N) acquisition of Vizio (VZIO.N) creates substantial risk
** Brokerage chops PT from $77 to $51, implying ~21% downside to stock’s prior close
** Deal with smart-TV maker VZIO sets a new connected TV (CTV) valuation well below ROKU’s current multiple, Wells Fargo analyst Steven Cahall says in research note
** Cahall thinks WMT is ~1/3rd of ROKU’s device sales/net adds, but with the retailer set to buy VZIO for its SmartCast O/S, this will likely pressure net adds by 2025-26
** In addition, with WMT likely moving its onn CTV to SmartCast, ROKU will need to reposition given “this major shift in the competitive landscape”
** WMT last Tues announced $2.3 bln deal to buy VZIO
** ROKU’s stock has shed 32% since co on Feb 15 forecasted steeper-than-expected Q1 loss amid stiff competition from heavyweights such as Netflix (NFLX.O) and Amazon.com (AMZN.O) for advertising dollars
** Current rating on ROKU among 33 analysts is “hold”, per LSEG; median PT of $81 down from $85 a month ago
(Lance Tupper is a Reuters market analyst. The views expressed are his own)
