Roku (NASDAQ:ROKU) is doing a surprisingly good job as both a hardware and software provider in video streaming. Yet, despite this, it just took a massive 8% hit to its share price after Wells Fargo offered up some downright pessimistic reports on Roku’s likely path forward. The word from Wells Fargo, via analyst Steven Cahall, notes what pretty much most casual observers of the video streaming market have noted for some time.
There will be hits taken from a decline in overall advertising revenue. With consumers pulling in their wallets, most brands must do likewise and restrain their ad purchases, which means a smaller overall market and less cash available for streaming platforms. While Roku was expecting much better out of the third quarter, Cahall suggests that trouble will start hitting in the fourth quarter. Cahall expects an 8% drop in revenue per streaming hour, double the drop seen in the third quarter, and cut revenue estimates accordingly.
Does Roku Stock Have a Future?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on ROKU stock based on nine Buys, 13 Holds, and two Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average ROKU price target of $85.10 per share implies 36.14% upside potential.
