Roku shares plummet after negative Wall Street analysis
Smart TV maker Roku saw its shares plummet close to 20% on Friday — the latest in a series of double-digit stock tumbles as the video streaming war heats up.
Friday’s plunge — Roku’s third double-digit stock drop in just two weeks — were triggered by a Wall Street research report that questioned Roku’s ability to make money in light of deep-pocketed rivals, like Apple, entering the fray.
“We see dramatically more competition emerging that will likely drive the cost of [over-the-top] devices to zero,” Jeffrey Wlodarczak of Pivotal Research Group analyst said in research note snarkily titled “Is Roku Broku?”
Roku faces competition from big companies with big budgets that “are not necessarily focused on generating an economic return,” he said, pointing to the likes of Apple, Amazon and Google, as well as any aggressive moves by cable operators.
Shares of Roku also took a beating on Wednesday — down 14% — after cable company Comcast announced it would give away an Xfinity Flex streaming box for free to cord-cutting subscribers who only want internet.
And last week the stock dropped more than 10% after Apple said its new streaming service, debuting in November, will cost a measly $4.99 a month — besting Disney’s plans to launch a streaming service for $6.99 per month.
“Everyone has realized the living room is too important and the big boys … with massive leverage are likely to make Roku growth much more difficult,” Wlodarczak wrote in the note, which initiated coverage of the stock with a “sell” rating and a $60 price target.
Shares of Roku — while up some 250% this year, far outpacing the broader market — are down more than 30% from a September high of close to $170 a share.
“Roku stock still looks dramatically overvalued despite the recent pullback,” Wlodarczak said of Friday’s stock price, which opened at $127.39 a share.
Roku shares on Friday closed at $108.05, down 19%.
Source : David Montalvo Link