Key Points

  • 1. Wells Fargo analysts downgrade Roku due to "considerable risk" from Walmart's acquisition of Vizio, impacting Roku's growth and forcing the company to adjust its strategy.
  • 2. Walmart's acquisition is expected to lead to a shift in market competition, as Walmart transitions its connected TV devices to Vizio's platform, potentially affecting Roku's subscriber base.
  • 3. Roku's top channel partners are Walmart, Best Buy, and Amazon, but with Walmart now having its own software platform, Roku faces challenges in maintaining its competitive edge.
  • 4. Roku must improve its narrative for investors to support long-term value over the Walmart/Vizio transaction and adapt to the changing landscape of the streaming market.
  • 5. The coming months will be crucial for Roku as it navigates through these challenges and seeks to secure its position in the rapidly evolving streaming industry.

In a significant move on Tuesday, Wells Fargo analysts downgraded Roku (ROKU) from Equal Weight to Underweight, citing "considerable risk" stemming from Walmart's (NYSE:WMT) acquisition of Vizio (VZIO).

The Consequences

The financial firm also slashed Roku's price target from $77 to $51.

Roku's shares dipped 3.6% in pre-market trading following the announcement.

Walmart's acquisition of Vizio is expected to negatively impact Roku's growth in new subscribers for the years 2025-26, primarily because Walmart is likely to transition its connected TV devices from Roku's software platform to Vizio's SmartCast platform, according to the financial firm.

"Roku will need to adjust its strategy due to this significant shift in market competition. Roku and Walmart also collaborate on interactive ads, and it is expected that Walmart will redirect its Walmart Connect service to reach the SmartCast audience," analysts noted.

Wells Fargo analysts also highlighted that Roku's top three channel partners are Walmart, Best Buy (NYSE:BBY), and Amazon (NASDAQ:AMZN).

With Walmart now having its own Connected TV software platform, Best Buy not focusing on media or advertising, and Amazon likely having all it needs with its Prime Video service for content and advertising, the FireTV software platform, and a well-established supply chain for devices, Roku finds itself at a crossroads.

The Position of Roku

"This positions Roku to be evaluated based on fundamental financial value, and we believe the company must improve its narrative for investors to support a significant increase in long-term value over the Walmart/Vizio transaction," they concluded.

The move by Wells Fargo underscores the potential challenges Roku may face in the wake of Walmart's acquisition of Vizio. With Walmart's significant presence in the retail and now the connected TV space, Roku will need to pivot its strategy to maintain its competitive edge and sustain growth in the increasingly crowded streaming market.

Investors will be closely watching Roku's response to this downgrade and its ability to adapt to the changing landscape. As competition intensifies and market dynamics shift, the coming months will be crucial for Roku as it navigates through these challenges and seeks to secure its position in the rapidly evolving streaming industry.



About ROKU, INC


  • Ticker ROKU
  • Exchange NASDAQ
  • Sector Communication Services
  • Industry Entertainment
  • Shares Outstandng 120,734,000
  • Market Cap $6.87B
  • Description
  • Roku, Inc., together with its subsidiaries, operates a TV streaming platform. The company operates in two segments, Platform and Player. Its platform allows users to discover and access various movies and TV episodes, as well as live TV, news sports, shows, and others. As of December 31, 2021, the company had 60.1 million active accounts. It als...
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