Roku shares tank after Morgan Stanley says valuation ‘hard to justify,’ downgrades stock
- Morgan Stanley on Thursday lowers its rating to underweight from equal-weight for Roku shares.
- The firm’s analyst says the stock’s valuation at more than 17 times estimated 2018 platform sales is too excessive.
- Roku shares fell 6 percent Thursday.
What has dragged Roku stock down?
Sep 13, 2021 · Roku stock (NASDAQ NDAQ : ROKU) dropped almost 16% in the last one month and now trades at under $320 per share. The company’s shares tumbled following the Q2 2021 financial results in early ...
Why is Cathie wood starting to buy Roku stock again?
Jan 10, 2022 · In addition, one of the main problems Roku faces is stiff competition from television manufacturers that are creating their own systems to replace its platform. What Wall Street Says According to...
Is it too late to buy Roku stock?
Find the latest Roku, Inc. (ROKU) stock discussion in Yahoo Finance's forum. Share your opinion and gain insight from other stock traders and investors.
Why did Roku stock fall in the premarket session?
Nov 17, 2021 · Roku (NASDAQ: ROKU) has slid 11.5% to its lowest point in nearly a year, with analysts including Michael Nathanson issuing further downgrades and target cuts following its mixed third-quarter ...
Why has Roku tanked?
Roku blamed the slowing revenue growth on continued supply chain disruptions impacting the U.S. television market.Feb 18, 2022
Will Roku stock go up?
Expect Roku's 91/100 score on quality to rise in 2022. Similarly, Roku's growth score of 68/100 will rebound later in the year, thanks to new account additions. Roku is a Wall Street favorite. Most analysts rate the stock as a buy with a price target in the range of $362 to $550 (per tipranks).Jan 10, 2022
What is the prediction for Roku stock?
Stock Price Forecast The 24 analysts offering 12-month price forecasts for Roku Inc have a median target of 180.00, with a high estimate of 305.00 and a low estimate of 94.00. The median estimate represents a +54.55% increase from the last price of 116.47.
Is Roku a long term buy?
Roku should be a long-term winner. As many longtime Roku ( ROKU 2.55% ) shareholders painfully know, the leading global streaming and connected TV company has seen its stock decline by more than 70% since July of last year.Mar 5, 2022
Is Roku A Buy Sell or Hold?
Roku has received a consensus rating of Buy. The company's average rating score is 2.58, and is based on 20 buy ratings, 1 hold rating, and 5 sell ratings.
What is Zoom's target price?
Stock Price TargetHigh$295.00Low$100.00Average$164.19Current Price$109.05
Is SQ a buy or sell?
A company with a P/E ratio of 40 and a growth rate of 50% would have a PEG ratio of 0.80 (40 / 50 = 0.80)....Momentum Scorecard. More Info.Zacks RankDefinitionAnnualized Return1Strong Buy24.93%2Buy18.44%3Hold9.99%4Sell5.61%2 more rows
Is Disney a Buy Sell or Hold?
Walt Disney has received a consensus rating of Buy. The company's average rating score is 2.74, and is based on 17 buy ratings, 6 hold ratings, and no sell ratings.
A strong earnings report wasn't enough to support Roku's high valuation
Howard grew up in Philadelphia watching the Philly sports teams struggle for championships. He has been investing since 1989 and been a Fool since 2001. Prior to joining The Fool as a contract writer in 2019, Howard worked in the steel business as an engineer for 28 years.
What happened
Shares of Roku ( NASDAQ:ROKU) are up more than 135% in the past 12 months due to robust growth in television streaming services, and its platform specifically. The company reported another strong quarter last night, but investors are looking at one item from the report that has the stock dropping today. As of 11 a.m.
So what
Roku reported net revenue jumped 81% versus the prior-year period, and platform revenue soared 117%. Average revenue per user (ARPU), an important metric for growth, also increased 46% year over year. And the company earned a profit of $0.52 per share, blowing past analyst estimates of $0.13 per share.
Now what
While those streaming hours were still 19% higher than the year-ago period. Roku said the drop in streaming time versus the first quarter was due to "increased out-of-home entertainment activities (such as dining and travel) in Q2 as a result of pent-up demand and the loosening of COVID-19 restrictions."
The Atlantic Equities View
Hamilton Faber, Atlantic Equities co-founder and analyst, initiated coverage of ROKU with a bearish view. Even though the company is among the biggest streaming giants in the world, he expects its growth to slow by 2025.
What Wall Street Says
According to TipRanks, based on 20 analysts who cover ROKU, the company sports an average share price target of $350. That implies a massive upside potential — about 90%, as of last check. However, on average, the stock is rated a “moderate buy.”
Multiples Analysis: Is ROKU Expensive?
Looking at the comparable companies in the segment, we can see that ROKU is trading at a higher multiple than all the others. Even Netflix, which got a big valuation in the year 2021, has fewer stretched multiples than Roku. Moreover, among these four stocks, ROKU has depreciated the most in 2021, accumulating a decline of more than 50%:
Where This Leaves ROKU
For one reason, sometimes ROKU gives out a poor outlook just to outperform. For example, last quarter the company wrote on page 5 of the Q1 shareholder letter it expected Q2 adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) profits would be “$65 million at the midpoint.”
Issues With the ROKU Stock Valuation
Despite the negative outlook from ROKU and its apparently decelerating growth, analysts have actually raised their revenue forecasts for the company.
What To Do With ROKU Stock
If ROKU’s growth continues to decelerate (i.e., grow at a slower rate than prior growth rates), and if its EBITDA turns down 50% as the company is implying, expect to see ROKU keep falling.
