This Roku Stock Downgrade Doesn't Make a Lot of Sense
There's never a good time for an analyst downgrade when it's a stock you own, but even with that bias it's hard to see the logic in Wells Fargo analyst Steven Cahall downgrading shares of Roku (NASDAQ: ROKU) on Friday. Cahall is lowering his rating on the streaming video pioneer from a bullish overweight to a neutral equal weight, arguing that the upside potential is limited at its current valuation.
Cahall argues that average revenue per user (ARPU) expectations have already risen 50% over the past year. Roku would have to not just beat expectations but trounce the already high projections out there to keep the party going.
Valuation calls are cool and commendable, but what party is Cahall talking about crashing here, exactly? Roku shares are roughly where they were when the year began, up a mere 0.7% in 2021 through Thursday's close. He's also slashing his price target on the shares from $488 to $350, so it's more as if his valuation expectations have been revised than anything that the market is doing. The downgrade doesn't add up.
Source Fool.com