Investing.com - Roku shares were hit hard Friday after a Wall Street analyst rated the stock a sell and slapped it with a $60 price target.
The stock sunk about 20% in afternoon trading.
Roku (NASDAQ:ROKU), which lets users stream content via a set-top box, has been slumping since peaking at $176.55 on Sept. 9. Shares are off 25% this week alone.
It faces competition from the likes of Apple (NASDAQ:AAPL) with Apple +, Netflix (NASDAQ:NFLX), Walt Disney (NYSE:DIS) and others. A big blow came Wednesday when Comcast (NASDAQ:CMCSA) said it would give its Internet subscribers a free set-top box for its Infiniti Flex streaming service.
Friday, Pivotal Research came out with its sell rating and $60 target price, arguing the competition is going to overwhelm Roku. Analyst Jeff Wlodarczak said the stock is overvalued at current levels. His note to clients was titled “Is Roku Broku?,”
Roku was founded in 2002 and became a Wall Street darling when it went public at $14 in September 2017. It has three huge problems.
The stock shot up too far and too fast. The shares were up 476% for this year when they peaked at $176.55 on Sept. 9.
It's showing losses. Operating cash flow, however, is positive, at least through the second quarter.
It's relatively small. While revenue is trending north of $1 billion a year, that's a small number compared with the money Apple (NASDAQ:AAPL), Comcast (NASDAQ:CMCSA), Disney and Netflix (NASDAQ:NFLX) can pour into the streaming space.
In theory, Roku has fans. The consensus target on the stock is $123.20, and 10 of 17 analysts rate the stock a buy. One of the fans, Oppenheimer's Jason Hefstein, boosted his price target to $155 on Friday.
Some 61% of shares are held by big institutions, including Fidelity, Vanguard and Morgan Stanley (NYSE:MS). But the problem with big institutions is they can sell quickly.