Roku cut at Loop Capital as it sees ‘less margin of error’

Roku (NASDAQ:) was cut to Hold from buy at Loop Capital on Thursday, with analysts maintaining the price target at $85 per share.

The analysts told investors in a research note that the visibility for the stock remains limited despite the firm previously picking Roku as its top pick for 2023 at the beginning of the year.

“Streaming’s competitive position has only been enhanced and Roku beat guidance each quarter reported this year; the ad market has improved, but visibility remains limited, and valuation has increased to about 3x forward revenue,” they wrote.

This week, Roku raised 3Q revenue and adjusted EBITDA guidance, and announced cost-cutting measures. It also noted a roughly $300 million impairment and restructuring charge to help achieve its stated goal of being Adjusted EBITDA positive next year.

“While we commend the cost controls under new CFO, Dan Jedda, and believe they could set the company up for another beat, the latest restructuring also signifies the potential for slower revenue growth in 2024,” the Loop Capital analysts added.

“We believe there is less margin of error at the current valuation, particularly with a challenging environment for media and entertainment advertising as the streaming companies have shifted their focus to profits from growth.”