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Investing.com — Roku Inc (NASDAQ:ROKU) shares have fallen over 5% Wednesday after analysts at research firm Atlantic Equities initiated the stock with an underweight rating.
Analyst Hamilton Faber set a $136 price target on the stock, well below the current price of $211.23 per share.
Faber told investors in a research note that he expects account adds to be below the current expectations due to the company’s low penetration in markets outside of the U.S.
“We estimate that 80% of Roku’s active accounts are located in the US, implying 34% penetration in that market and just 6% in the other markets in which it operates (Canada, Mexico, Brazil, the UK, France and several other Latin American countries),” explained Faber.
The analyst added that Roku is currently the operating system provider for 38% of U.S. smart TV sales, and Atlantic estimates total U.S. penetration will reach 40% by the end of 2025.
“We estimate annual US adds will ease from a pre-pandemic figure of around 8m in 2019 to an average of 2.3m over the next four years. Meanwhile, we expect international to pick up to average 3.2m adds from around 2m in 2019. Overall, we see global adds averaging 5.5m for the next four years (with 8m in 2022, declining thereafter), meaningfully below consensus of 10.5m million,” concluded Faber.
