Roku slips as Loop Capital downgrades, citing valuation, revenue growth worries
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Roku (NASDAQ:ROKU) shares fell nearly 2% in pre-market trading on Thursday as investment firm Loop Capital downgraded the streaming media company, citing its valuation and worries over slowing revenue growth.
Analyst Alan Gould lowered his rating on Roku (ROKU) shares to hold from buy, noting that the current valuation leaves less room for a margin of error, especially with a "challenging environment" for media and entertainment advertising.
Additionally, the company's latest restructuring, in which it said it would cut about 10% of its workforce, suggests slower revenue growth to come. 
"While we commend the cost controls under new CFO, Dan Jedda, and believe they could set the company up for another beat, the latest restructuring also signifies the potential for slower revenue growth in 2024," Gould wrote in an investor note.
Additionally, Gould said that he believes the 2023 advertising upfronts were "challenging" and should starting hitting results in the fourth-quarter, with concerns that the scatter market has not improved.
On the plus side, Gould said that recent events, including the Charter (CHTR) dispute with Walt Disney (DIS) could result in a quicker decline in linear television and provide more growth to connected TV. It could also result in Disney launching ESPN as a streaming service faster than initially thought, which could also boost the shift to streaming.
Analysts are universally cautious on Roku (ROKU). It has a HOLD rating from Seeking Alpha authors, while Wall Street analysts rate it a HOLD. Conversely, Seeking Alpha's quant system, which consistently beats the market, rates ROKU a HOLD.

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