According to Justin Patterson, an analyst at KeyBanc, c’s shrinking market share and the company’s requirement for further investment will damper its profitability in the short term.
The stock price of Roku fell on Tuesday after analysts at KeyBanc Capital Markets cut their rating on the streaming service hub and producer of linked TVs. The analysts cited a sluggish ad market and the company’s ambitions for investing in hardware as the reasons for their decision.
After observing that the company “appears to be surrendering market share” in connected TV advertising while failing to attract a sufficient number of new media partners to its platform, the analyst at KeyBanc named Justin Patterson lowered his recommendation on Roku from “overweight” to “sector weight.”
Even though Roku reduced its personnel expenditures by around 5% earlier this month when it announced intentions to shed 200 workers, the company is still expected to experience difficulties in meeting its near-term profit predictions.
Roku previously stated that it believes that the “macro environment will continue to put pressure on consumer discretionary spending and weaken advertising budgets, particularly in the TV scatter market,” and that revenues will likely fall 7.5% yearly to $800 million. Roku is looking forward to the end of the year.
According to Patterson, they do not believe that pulling back from investment areas in North America, increasingly skewed to low to mid-range manufacturers and toward Walmart distribution, would slow their revenue recovery.
During the early morning hours of trading on Tuesday, Roku shares were marked 0.65% down to trade at $53.73 a share. This move would drop the stock over the past six months to approximately 43%.
Roku reported a loss of 88 cents per share for the three months ending in September, which was less than analysts had predicted. Revenues increased by 12% to $761 million, exceeding Wall Street analysts’ expectations, as the company added 2.3 million active accounts and streaming hours on the Roku Channel increased by 90% year over year.
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Author Valerie Remorosa 
