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Roku (NASDAQ:ROKU) shares are down over 6% in early Tuesday trading after a Wolfe Research analyst downgraded to Underperform from Peer Perform, citing “mounting challenges.”
The two key factors behind the downgrade call are “additional headwinds” facing active account growth and monetization of existing and new accounts. The new Wolfe’s price target for ROKU stock is $77, signaling a downside risk of around 10% compared to yesterday’s closing price.
“While near-term results may show a slowdown in net adds and active account growth, we base our Underperform rating primarily on our expectation of pressures on ARPU growth and decelerating CPMs from increased CTV advertising supply and from the lagging relationship between TV advertising and the economy,” the analyst told clients in a note.
Elsewhere, a Raymond James analyst initiated research coverage of Roku at Market Perform.
While the analyst is positive on the fundamentals and attractive valuation, he sees near-term risk-reward as “less favorable.”
“Macro headwinds could impact Roku’s advertising business and near-term margins will be under pressure as the company accelerates investments in R&D and S&M,” he added.
ROKU stock price is down roughly 65% YTD.
