Shares of Roku, the streaming-media company, fell on Monday after Seaport Research downgraded the stock, making it the second firm to do so in just a few days. David Joyce, a researcher at Seaport, lowered Roku’s stock rating from Neutral to Sell, giving it a target price of $75. Joyce expressed concerns about Roku’s future growth prospects amidst stiff competition from streaming giants like Disney+ and Netflix.
According to Joyce, Roku’s advertising growth is being hindered by various factors. Firstly, the launch of ad-supported streaming services by Netflix and Disney provides advertisers with alternative options. Secondly, there is a decline in media-and-entertainment ad spending due to the ongoing Hollywood strikes, which are expected to impact the availability of attractive new content until 2024.
Although Roku’s shares have more than doubled this year, declining by only 0.5% to $95.42 in early Monday trading, these recent downgrades are raising fears among analysts. Last week, MoffettNathanson also downgraded the stock to Sell, citing the threat of larger players capturing market share in the advertising industry.
Analyst Kenneth Leon from CFRA predicts that 2024 could be a crucial year for Roku to prove that its growth strategy is sustainable while generating profits.