Key Points

  • Roku Downgraded: MoffettNathanson shifted the Roku stock from Neutral to Sell, raising concerns over its current market valuation.
  • Market Overvaluation: The recent surge in Roku's stock price has led analysts to believe that its market valuation is excessively high, considering potential revenue risks.
  • Revenue Risk Forecasts: Anticipations of revenue slowdown in Roku's fiscal year 2024 due to declining growth rates in premium SVOD subscriptions.
  • Shift in Revenue Sources: Roku's primary revenue growth in 2023 was fueled by content distribution payments, driven by new client acquisitions and price hikes in SVOD services.
  • Future Growth Prospects: Predictions suggest that 2024 growth will pivot towards Connected TV (CTV) advertising, yet larger competitors may claim a significant market share.

Roku (ROKU) faced a significant setback on Friday as MoffettNathanson downgraded the stock from Neutral to Sell, simultaneously raising the price target to $66 from $64 per share.

Analysts initially shifted their recommendation from Sell to Neutral, observing the company's increasing focus on profitability and improving profit margins.

However, in light of Roku's recent surge in stock price, the investment firm now believes that the current market valuation of Roku is excessively high when juxtaposed with the potential revenue risks they anticipate continuing.

"In this context, given the limited financial information the company provides, we believe investors do not fully grasp Roku's challenging revenue comparisons for its fiscal year 2024," noted the analysts.

The firm's analysis indicates Roku's primary revenue growth in 2023 stemmed from content distribution payments, fueled by the acquisition of a significant new client and substantial price hikes for subscription video-on-demand (SVOD) services.

Analysts highlighted data from Antenna revealing that in October 2023, the growth rate of premium SVOD subscriptions in the United States had decelerated to just +12%, "even lower than the 2018 rate before serious streaming service competition began."

"As we move beyond 2023, we anticipate SVOD market sluggishness and a year-mark of price changes and new customer acquisitions will decelerate content distribution revenues," articulated the analysts.

"Consequently, the primary growth driver for 2024 will likely be connected TV (CTV) advertising. While we anticipate a robust CTV advertising market, we expect larger players like Amazon Prime, Netflix, and Disney to capture an increasingly significant share of this market," the analysts concluded.



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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