Roku Could Face Short-Term Headwinds. But the Stock Is Still a Buy, Says This Analyst.

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Shares of Roku were sinking in premarket trading Tuesday after analysts at KeyBanc Capital lowered their price target on the streaming equipment maker’s stock.

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While analyst Justin Patterson maintained his overweight rating, he lowered his price target for Roku (ticker: ROKU) from $430 to $325 in anticipation of a near-term slump in newly active accounts.

“We expect further active account headwinds” [near term] As consumers favor TVs over sticks, and TV supplies are disrupted,” he wrote in a research note.

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KeyBank also slightly lowered its revenue and earnings projections for 2021, 2022 and 2023, saying current models underestimate the extent to which COVID-19 delays international investments.

Patterson said that with the revised price target, the risk/reward calculus seems increasingly favorable for the stock. Roku’s gains in advertising, steady growth in TV operating system market share and international expansion should still sustain about 30% annual revenue growth, he said.

“We suspect the stock will outperform post-earnings as the macro picture becomes clearer,” he added.

Roku stock was down 0.3% at $182.50 in premarket trading on Tuesday. The stock is down 20% this year, but remains a buy for many analysts. It had 22 buy ratings, five hold and three sell or underweight ratings on FactSet.

Write to Sabrina Escobar at [email protected]

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