Digital media player company Roku (NASDAQ: ROKU) dipped in trading on Thursday. This comes after top-rated Loop Capital analyst Alan Gould downgraded the stock from Buy to Hold while assigning a price target of $85. The analyst expressed concerns about the company’s valuation and slowing revenue growth even as Roku announced cost-cutting measures and layoffs yesterday. The analyst believes that these measures signal a slowdown in revenue growth for the company.
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Gould emphasized a limited margin for error when it comes to the company’s valuation in the tough media and entertainment advertising landscape. Additionally, the analyst remains concerned about Roku’s advertising upfronts and termed them as “challenging,” which could adversely impact the company’s Q4 results.
However, despite these challenges, the analyst highlighted potential positives, such as an accelerated decline in linear television which could result in quicker adoption of connected television. In addition, disputes between Disney (DIS) and Charter Communications (CHTR) could accelerate this shift.
Analysts remain cautiously optimistic about ROKU stock with a Moderate Buy consensus rating based on eight Buys, eight Holds, and two Sells.