Should Roku Investors Be Worried?

A yearlong stock drop, the loss of its platform chief and fierce competition from Google may have some shareholders uneasy, even if the hardware firm has plenty of room for growth

Last year, Roku moved to expand its focus on original content, picking up the former Quibi library at the start of 2021 to help boost its 4-year-old streaming channel. With a robust ad business to back it up, a few analysts looked to Roku as a prime stock pick, while some observers predicted that the company — most associated with its hardware — would buy a film and TV studio in 2022. But on Jan. 7, Scott Rosenberg, a top executive who oversaw the launch of The Roku Channel and led the company’s move into content, announced he was leaving later this spring after nearly a decade with Roku. While Rosenberg, senior vp and GM of Roku’s platform business, will help with the transition, the news comes as Roku’s stock has been trending downward. MoffettNathanson analyst Michael Nathanson downgraded Roku’s stock from “neutral” to “sell” in mid-November and cut his price target from $330 to $220. In the hardware department, Roku is facing growing competition from Google, whose Google TV and Android TV reportedly have a combined 110 million monthly active devices as of January. (That figure doesn’t necessarily translate into the number of monthly active users, however.) But others on Wall Street remain more bullish. “With 56.4 million active accounts as of the third quarter, Roku is an industry leader in connecting streaming video publishers and advertisers with consumers,” Guggenheim analyst Michael Morris, who has a “buy” rating on the stock, wrote in December. Morris also saw “potential” for Roku to make acquisitions to bolster its value, pointing to Starz, AMC Networks, fuboTV, Vizio and Chicken Soup for the Soul as possible takeover targets.