Roku (ROKU) - Get Report shares fell after the streaming technology company received a downgrade from Stephens analyst Kyle Evans to equal weight from overweight, with a reduction in his share-price target to $105 from $155.
Evans is concerned about Roku’s partnership with Chinese electronics maker TCL to make smart TVs. “These aren’t new fears to us or ROKU shareholders,” he wrote in a report.
Roku shares recently traded at $108.21, down 5.66% from Thursday’s close. The stock has slumped 9% over the last three months, compared to a gain of 4% for the Nasdaq Composite Index during that period.
“We don’t have any new/incremental information on this key partnership, and the agreement has clearly been mutually beneficial from a market share perspective. But we believe ROKU has benefited tremendously from TCL’s heavy lifting,” Evans wrote.
But it hasn’t worked out quite as well for TCL, which Evans wrote “still isn’t participating meaningfully in ROKU’s downstream advertising/commerce economics."
“And we have gradually grown more concerned with the duration/magnitude of what we believe is ROKU overearning versus its most important partner," according to Evans.
Another concern for Evans: “the slow pace of ROKU’s international expansion.” He also cited his worry of “creeping expectations” for OneView, Roku’s ad platform.
Earlier this month, Roku reported first quarter revenue of $320.8 million, up 55% from the year-earlier quarter and well above the $305 million forecast of analysts polled by FactSet.
Roku posted a loss of 45 cents per share for the latest quarter, slightly better than analysts’ estimate of a 46 cent loss.