Roku shares tumbled on Monday after Citi downgraded the stock to 'sell,' citing, among other factors, rising competition in the streaming arena.
shares, an increasingly competitive streaming space, and what appears to be robust hiring plans fueled Citi's share-crushing downgrade of the stock on Monday.
Roku shares plunged as much as 8%, to a two-month low, after Citi analyst Mark May lowered his rating on the streaming-device company from"neutral" to"sell" and trimmed his price target from $53 to $50 a share. "This is not necessarily a call on the Q1 earnings report," May said, referring to the company's yet-to-be-released quarterly report."In fact, we acknowledge the general secular tailwinds in the OTT space and the potential risk from investors continuing to reward Roku with a premium multiple."
May cited a few factors behind his downgrade. First, Roku's stock had rallied nearly 110% through last Friday's closing price, causing its multiple to get a bit out of hand. While Roku is trading at 11 times enterprise value-gross profit, its competitors like Netflix, Twitter, Snap, and Facebook are trading just above 5 times. That ratio is just a fancy way of trying to assess what a stock is worth.
Additionally, an increasingly competitive over-the-top landscape could be a challenge for Roku, Citi said. Among other brands, the firm citedNotably, Citi also said what look like big hiring plans at the company could be an issue. Roku currently has the highest ratio of job openings to its current headcount, at 15%, of the companies May covers. That figure is 11% at
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