Roku: Buy the Dip or Pump the Brakes? This Top Analyst Remains Sidelined
Roku (NASDAQ:ROKU) investors got cold feet today, sending shares plunging nearly 12%. The reason? Best Buy (NYSE:BBY) announced a deal with Amazon (NASDAQ:AMZN) that will drastically shrink Roku’s presence in the chain’s stores. As part of the deal, Best Buy will use Amazon’s Fire TV operating system in its Insignia-brand smart TVs, phasing out Roku’s operating system.
Oppenheimer’s top analyst Jason Helfstein commented, “We see this event as a modest negative for Roku as the company loses a Roku TV partner, Roku TVs likely receive incrementally worse display at BBY stores and Roku TV partners likely see increased competition on the Amazon marketplace (BBY & AMZN total 35-40% market share in electronics & appliances). We believe it’s a possibility that Best Buy will share in the back-end economics of the Fire TV platform, which if confirmed would serve as an incremental negative catalyst for ROKU. Positively, this locks Amazon in to Insignia & Toshiba, eliminating the possibility of a similar deal with TCL, Roku’s most important Smart TV OEM partner.”
Net net, Helfstein remains sidelined on ROKU shares with a Market Perform rating.
Helfstein’s picks have a 18.4% one-year average return with a 64% success rate, according to analyst ranking service TipRanks, placing him in the top 2 percent of all Wall Street analysts.
The majority of the Street sides with the Helfstein’s cautious take on the video streaming firm, as TipRanks analytics demonstrate ROKU as a Hold. Out of six analysts polled in the last three months, two are bullish on Roku stock, three remain sidelined, and one is bearish. However, with a return potential of nearly 28%, the stock’s consensus target price stands at $40.75.