Roku (ROKU) shares dropped more than 11.7% on Wednesday amid an Underweight initiation by Atlantic Equities over concerns of slowing growth and weak penetration in markets abroad.
“We estimate that 80% of Roku’s active accounts are located in the U.S., implying 34% penetration in that market and just 6% in the other markets in which it operates,” analyst Hamilton Faber wrote in a note to investors. The streaming device company’s international markets include Canada, Mexico, Brazil, the UK, France, and several other Latin American countries.
The analyst expects U.S. annual additions to ease with overall global adds for the next four years “meaningfully below consensus of 10.5m million.”
The analyst set a price target of $136 per share, which implies a downside of more than 30% from current levels.
The stock accelerated its losses during the afternoon session on Wednesday amid a broader tech sell-off over concerns of Fed rate hikes.
In December, Roku shares jumped nearly 20% in one session after striking a multi-year deal with Alphabet’s Google for YouTube and YouTube TV.
Despite the one-day surge, Roku’s stock underperformed in 2021, declining about 25%. In 2020, Roku shares gained a whopping 146%.
Most of the Street still remains bullish on the stock, with 23 Buy, 4 Hold, and 3 Sell ratings, and an average price target of $358.
Ines is a markets reporter covering stocks from the floor of the New York Stock Exchange. Follow her on Twitter at @ines_ferre
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Source: https://finance.yahoo.com/news/roku-drops-amid-underweight-analyst-recommendation-190521465.html