Among the biggest pandemic beneficiaries, Roku (NASDAQ:ROKU) stock has been on a wild ride over the past few years. After hitting a high of more than $490 per share in 2021, ROKU stock has since sunk to around $62 per share today, losing another 9% in today’s session on an analyst downgrade.
Wells Fargo analyst Steven Cahall cut his estimates for the connected TV company in a rather dramatic fashion. Revenue estimates were slashed to an 8% drop this coming quarter (from 4% in Q3), and Cahall suggests that total revenue may be roughly 3% below where the consensus estimate is currently pegged.
The reason for this reduced revenue outlook appears to be a weaker-than-expected advertising market. Various advertising trends appear to be headed in the wrong direction, and an expected reduction in media spend tied to the writer and actor strikes in Hollywood is also to blame for these numbers.
Let’s dive into what investors may want to make of this call today.
Why Is ROKU Stock Sinking Today?
To the average investor, Wall Street price targets may not matter a great deal. Sure, the analysts behind these calls are among the most educated and informed people covering these companies. However, the view of many long-term investors is that these one-year price targets, based mainly on backward-looking information, may not be very informative for those with a longer investing time horizon. Fair enough.
However, for those with a more near- to medium-term view on certain stocks, these price targets can matter. So, when an outfit like Wells Fargo cuts its price target on a stock from $84 per share to $70 per share, investors take note (particularly because the stock closed below $70 per share yesterday).
Today’s move certainly prices in much of the negativity around advertising spending that those in the market are already aware of. Perhaps hearing it from the experts has changed the investing behavior of certain individuals today.
That being said, Roku appears to be a stock that investors who are involved with this company will want to watch closely from here.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
