Roku plunges 22% as analysts rush to downgrade following Q2 miss, weak guidance
Justin Sullivan

Roku (NASDAQ:ROKU) shares plunged more than 20% on Friday after the streaming and connected TV company reported second-quarter results that missed estimates and offered weak guidance, prompting several analysts to downgrade the stock. 
Evercore ISI Group analyst Shweta Khajuria cut her rating on Roku (ROKU) to in line from outperform and slashed the price target to $75 from $140, noting that Roku's (ROKU) headwinds are primarily the result of weak macro, as advertising slows down and operating expenses are rising. 
Khajuria noted "the business is not broken," but slowing revenue growth and rising costs will result in a "double whammy" to earnings and makes forward multiples look elevated, issues that may not resolve anytime soon.
Ultimately, Khajuria believes Roku (ROKU) will be a "large beneficiary" as advertising rebounds, but that may not happen "for a few quarters."
The Trade Desk (TTD) shares fell 7.5% in sympathy with Roku's (ROKU) decline. 
Susquehanna analyst Shyam Patil also downgraded Roku (ROKU) to neutral from positive, while cutting the price target to $70 from $200. Patil said that connected TV is the "next leg of growth" for advertising and Roku (ROKU) is well positioned, but larger issues are likely to hit the company for some time. 
"... [M]acro headwinds such as rising inflation and supply chain disruptions are having a severe impact on the business â both on the advertising side and the engagement side through lower consumer discretionary spending," Patil wrote in a note to clients, adding that these issues "are likely to persist in the near term."
For the third quarter, Roku (ROKU) said it expects revenue to be $700M, well short of consensus for $902.7M. It also expects a gross profit of $325M, a net loss of $190M, and EBITDA of -$75M.
Ahead of earnings, investment firm Bank of America cut its estimates on Roku (ROKU), citing worries about the supply chain, inflation and a potential recession.
Analysts are largely positive on Roku (ROKU). It had an average rating of BUY from Seeking Alpha authors, while Wall Street analysts rate it a BUY. Conversely, Seeking Alpha's quant system, which consistently beats the market, rates ROKU a SELL.