Benjamin Swinburne is the analyst behind this bad bit of Roku news. He claims that the company may experience trouble in the future with competitors. He also mentions concerns about the company’s gross margins and gross profits.
The Morgan Stanley analyst’s Roku news has him dropping it from a previous rating of “Equal-Weight” to a new rating of “Underweight.” At the same time as the downgrade, he also increases his price target for ROKU stock from $100 per share to $110 per share, reports MarketWatch.
An upgrade to the price target for ROKU stock at the same time as a downgrade might seem strange. However, it’s worth noting that this new price target is still incredibly bearish. The stock closed out the last day of trading before the analysts’ note at $160.37. That’s a 45.79% higher than Swinburne’s price target.
Swinburne says in his note to investors obtained by CNBC.
“Roku shares are up over 400% YTD due to rising estimates and overall exuberance over all things streaming. As a result, we see the risk/reward skewed to the downside. Roku’s valuation levels have surged past digital media players and even past high-growth SAAS [software as a service] companies … despite structurally lower gross margins.”
Morgan Stanley’s bearish Roku news has the stock down 14.29% as of Monday afternoon. That’s a major blow to the stock, but it isn’t enough to wipe out its positive movement in 2019. ROKU stock is currently up 393.14% since the start of the year.