Roku gets hit with a 'sell' as analyst says it's 'difficult to justify the valuation' after 131% surge this year

RokuRoku CEO Anthony Wood
  • Roku shares dropped 14% Wednesday after receiving a “sell” rating from Loop Capital.
  • Loop said the stock was difficult to justify at these valuations.
  • S hares were still up more than 100% this year, on the back of strong growth in active accounts.
  • Watch Roku trade live.

Shares of Roku were down 14% Wednesday after the company received a “sell” rating from Loop Capital. Analyst Alan Gould downgraded the streaming-device maker based on its high valuation, citing Roku’s significant premium to its streaming peers.

“We recognise that stocks can go from expensive to more expensive, but we can no longer justify a Hold rating on Roku at this price,” said Gould, who left his price target unchanged at $US45 – a 27% drop from where shares were currently trading. The “sell” rating was the first assigned to the stock since May.

“The excessive valuation, in our view, is corroborated by increased insider selling and the company filing to sell stock,” Gould added. “Roku has appreciated 131% since December 31, which compares with 33% for Netflix, 21% for the FANG stocks and 11% for the S&P 500.”

Loop Capits Roku chartLoop Capital, Factset

But Gould wasn’t the only one to take notice of Roku’s lofty valuation. Macquarie analyst Timothy Nollen also downgraded the name, shifting his call from “buy” to “hold.”

Roku reported solid fundamentals in its fourth-quarter earnings report, fuelling a more than 130% surge in it’s share price this year.

The company reported its active accounts had grown 40% year-on-year for the quarter to 27 million and that streaming hours had spiked 69% to 7.3 billion.

Total revenue was forecast to be over $US1 billion for 2019, ahead of analyst expectations of $US985 million according to consensus estimates compiled by Bloomberg.

Even with Wednesday’s plunge, Roku was still up over 100% this year.

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