Roku stock plummets as investors weigh big tech competition, shaky ad market

Feb 16, 2024

Alexandra Canal

Roku (ROKU) stock sank more than 20% on Friday as continued weakness in the advertising market and more competition from tech giants like Amazon (AMZN) weighed on investor sentiment.

Roku beat on Q4 revenue and earnings expectations and saw double-digit gains in both accounts and hours streamed, with 80 million active accounts on the platform.

Still, the company slightly missed guidance estimates for gross profit in the current quarter. Roku guided to Q1 gross profit of about $370 million. Wall Street was expecting closer to $373 million.

Average revenue per user, or ARPU, fell 4% year over year amid a greater focus on international markets; management said domestic ARPU was flat to slightly up in the quarter.

While the ad market has rebounded for Big Tech companies, smaller players haven’t reaped the benefits. Roku acknowledged the difficulties: “We remain mindful of near-term challenges in the macro environment and an uneven ad market recovery,” the company said in its shareholder letter.

Wall Street was downbeat on the company’s prospects as a result.

“A high percentage of platform revenue is driven by subscription video-on-demand (SVOD) advertising, SVOD price increases, and media & entertainment advertising (M&E). These areas are expected to struggle for most of 2024,” Oppenheimer analyst Jason Helfstein wrote in a note on Friday, downgrading the stock to Perform from Outperform and removing his $100 price target.

He added that, although Roku can remain a market leader by leveraging its advantages in pricing and merchandising, the company’s near-term headwinds in its exposure to M&E and streaming subscription services will likely damper investor sentiment.

FILE PHOTO A video sign displays the logo for Roku Inc, a Fox-backed video streaming firm, in Times Square after the company's IPO at the Nasdaq Market in New York, U.S., September 28, 2017. REUTERS/Brendan McDermid/File Photo

A video sign displays the logo for Roku Inc, a Fox-backed video streaming firm, in Times Square after the company’s IPO at the Nasdaq Market in New York, Sept. 28, 2017. (Brendan McDermid/REUTERS/File Photo) (Reuters / Reuters)

The company has been facing more competition in the connected TV and streaming ads business.

Amazon rolled out ads on its Prime Video streaming service last month in the US. Wall Street has been bullish on the tech behemoth massively disrupting the shifting media market as companies like Netflix (NFLX) and Disney (DIS) are also in the running for ad buyers.

On top of Amazon, another heavy hitter — Walmart (WMT) — could also weigh on device sales.

“Walmart’s unexpected interest in acquiring [budget TV maker] Vizio would create another well-scaled entrant to compete with Roku in their most important retail channel,” MoffettNathanson analyst Michael Nathanson wrote. “Roku’s decision to create their own branded TVs perhaps is an acknowledgement that the road ahead will not be as easy as the prior road that was less traveled by many of these players.”

JPMorgan, which maintained an Overweight rating and $100 price target, said that Roku’s first quarter revenue guide of 15% year-over-year growth, coupled with platform revenue growth of 13%, “ultimately does not appear to be enough to offset investor concern around potential Amazon advertising video on demand impact in second half of the year.”

Roku enacted a slew of cost-cutting measures last year, including layoffs, to bring down operating expenses. Shares are down about 20% since the start of the year, weighed down by Friday’s steep sell-off.

Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at

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