Roku Inc (NASDAQ:ROKU) had just had quite the earnings party, with investors sending shares skyrocketing November 9th on back of an impressive first quarter as a publicly traded company. Yet, Oppenheimer analyst Jason Helfstein quickly turned party pooper on the digital streaming business’ climbing valuation with a downgrade.
Helfstein said, “Downgrading ROKU to Underperform from Perform on valuation, and establishing a price target of $28. While Roku has established itself as the leading independent OTT streaming platform though a device and software strategy, the stock is now the most expensive publicly traded Internet-based company, on the basis of Platform revenue or Platform gross profit. While 3Q Platform gross profit exceeded our estimate by 21%, this was partially driven by one-time factors, and growth should slow to normal levels in 4Q. In our view, the stock is trading on non-fundamental factors, driven by a limited float (15% of non-GAAP shares) and high short interest (likely over 27% of float, as data is delayed). We see $28 as fair value based on 10x 2019E Platform gross profit.”