'Limited Upside:' Why This Roku Analyst Is No Longer Bullish

Video streaming equipment manufacturer Roku Inc. (NASDAQ: ROKU) just lost a bullish recommendation as fundamental issues weigh the stock down.

The Roku Analyst: KeyBanc Capital Markets analyst Justin Patterson downgraded Roku from Overweight to Sector Weight.

The Roku Thesis: Roku is losing share in connected TV ad dollars as opposed KeyBanc’s earlier view that it would see an outsized growth, the analyst said.

Also, the company is not in a position to meaningfully pull back from investment areas in North America and international TVs as well as AdTech, he said. If it chooses to rein in investments, revenue recovery will likely slow, he added.

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The current estimates do not fully reflect Roku’s challenges, Patterson said. The analyst expects revenue growth to remain sub-seasonal in the first half of 2023, making it difficult for growing revenue in 2023 or achieve EBITDA profitability in 2024.

Accordingly, the analyst reduced his 2022, 2023 and 2024 revenue estimates, and forecasts an EBITDA loss of $79 million for 2024. Against this backdrop, Roku shares "offer limited upside from current levels," he added.

Price Action: Roku closed Monday’s session down 3.87% to $53.91, according to Benzinga Pro data.

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