Roku fell over 9% in morning trading as MoffettNathanso downgraded it to "sell"

Roku fell over 9% in morning trading as MoffettNathanso downgraded it to "sell".MoffettNathanson lowered its forecast for Roku (ROKU.US) video advertising revenue, and lowered its rating from "neutral" to "sell" and its target price from $330 to $220.

It said that in order to better evaluate the estimation of video advertising, the agency tried to separate Roku channel from the third-party advertising revenue of the platform, with competitors Pluto andTubiCompare and estimate Roku's advertising revenue from its mainly ad-based video-on-demand (AVOD) service on its platform.

Nathanson said: "However, we found that some of the unidentifiable advertising revenue came from the long tail video content of the third-party service on Roku, and the advertising revenue was huge and growing rapidly. Because we believe that ratings and advertising spending will consolidate leading streaming services. Therefore, we reduced the company's total video advertising revenue forecast for 2025 by 24% to reflect the expected slowdown in advertising growth caused by the third-party service Long Tail Content on Roku. "

In addition, the analyst also cut Roku's total revenue by 17% in 2025.

Nathanson added that Roku still needs to continue to invest in content to remain competitive, and does not expect the company to have meaningful profit margin leverage in the next few years