Roku falls as Wells Fargo downgrades to "underweight" on shifting competitive landscape

Vizio Holding

27/02/2024 14:29

** Roku Inc's  ROKU.O  stock down 2.5% at $62.73 premarket
after Wells Fargo downgrades streaming-device provider to
"underweight" from "equal weight", saying it thinks Walmart's
 WMT.N  acquisition of Vizio  VZIO.N  creates substantial risk
    ** Brokerage chops PT from $77 to $51, implying ~21%
downside to stock's prior close
    ** Deal with smart-TV maker VZIO sets a new connected TV
(CTV) valuation well below ROKU's current multiple, Wells Fargo
analyst Steven Cahall says in research note
    ** Cahall thinks WMT is ~1/3rd of ROKU's device sales/net
adds, but with the retailer set to buy VZIO for its SmartCast
O/S, this will likely pressure net adds by 2025-26
    ** In addition, with WMT likely moving its onn CTV to
SmartCast, ROKU will need to reposition given "this major shift
in the competitive landscape"
    ** WMT last Tues announced $2.3 bln deal to buy VZIO
    ** ROKU's stock has shed 32% since co on Feb 15 forecasted
steeper-than-expected Q1 loss amid stiff competition from
heavyweights such as Netflix  NFLX.O  and Amazon.com  AMZN.O 
for advertising dollars
    ** Current rating on ROKU among 33 analysts is "hold", per
LSEG; median PT of $81 down from $85 a month ago

 (Lance Tupper is a Reuters market analyst. The views expressed
are his own)
 ((lance.tupper@thomsonreuters.com
lance.tupper@tr.com 1-646-279-6380))