Some stock market volatility is starting to materialize today, with most indices losing steam after yet another morning rally on Friday. That said, among the tech stocks leading the way on the downside today is Roku (NASDAQ:ROKU). Shares of ROKU stock are down more than 6% in early afternoon trading as investors price in a company-specific catalyst.
The primary driver for today’s decline in Roku appears to be a downgrade from MoffettNathanson today. Analysts at the firm cut their rating on ROKU stock from a “neutral” to a “sell” rating, citing the company’s valuation as their key point of concern.
Let’s dive into what investors may want to make of this downgrade and the corresponding move in Roku today.
ROKU Stock Sinks on Analyst Downgrade
Analyst ratings are intriguing catalysts for investors to consider. On the one hand, price targets and ratings are helpful for investors looking to the experts for their opinions. Interestingly, this downgrade also came alongside a price target increase (to $66 from $64), suggesting that the company’s opinion of Roku’s long-term trajectory may be somewhat disconnected from its 12-month forward outlook.
On the other hand, analyst ratings vary greatly in their ultimate accuracy over time. The bottom line is that none of us can predict the future. Accordingly, each of these ratings and price targets ought to be taken with a grain of salt, and individual investors are always best served by doing their own research and modeling out a company’s future prospects on their own.
That said, I think today’s decline in ROKU stock was warranted. MoffettNathanson did bring up some pertinent points about the company’s valuation and even ascribed a rather aggressive multiple to the stock.
Perhaps the next 12 months will turn out to be as bullish as analysts think, but maybe not. Personally, I think ROKU has been as volatile as it has for a reason. It’s not one I would step into right now.
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.
