Roku Downgraded, Analyst Calls Stock Too Expensive

Roku Inc ROKU has been on the rise since posting a remarkable bottom-line beat Nov. 8, but a mid-day Oppenheimer note put a pause on the rally.

The Analyst

Oppenheimer analysts Jason Helfstein and Jed Kelly downgraded Roku to Underperform and established a $28 price target on the stock.

The Thesis

The analysts expect algorithmic or non-fundamental trading driving Roku shares, considering a post-IPO volume inconsistent with peer averages.

“In our view, the stock is trading on non-fundamental factors, driven by a limited float (9 percent of non-GAAP shares) and high short interest (likely over 46 percent of float, as data is delayed),” Helfstein and Kelly wrote Tuesday, adding that it’s difficult to justify relatively high valuation despite leading over-the-top streaming peers.

Acknowledging Roku as the most expensive publicly traded Internet-based company "on the basis of Platform revenue or Platform gross profit," Oppenheimer attributed the firm’s gross profit consensus beat to one-time factors and anticipate immediate growth deceleration.

Price Change

Roku had traded steadily around $20 ahead of its third-quarter earnings, which propelled the stock to a $48.80 high Tuesday. Oppenheimer’s bearish note prompted a sharp fall, and at time of publication, shares were trading down 5.4 percent at $40.40.

Related Links:

Mike Khouw's Bullish Roku Trade

Roku CEO: 'Everyone Over Time Is Going To Shift Toward Streaming

Image credit: Mattnad (Own work) [CC BY-SA 3.0 or GFDL], via Wikimedia Commons

Market News and Data brought to you by Benzinga APIs
Comments
Loading...
date
ticker
name
Price Target
Upside/Downside
Recommendation
Firm
Posted In: Analyst ColorDowngradesPrice TargetTop StoriesAnalyst RatingsJason HelfsteinJed KellyOppenheimer
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!