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Roku’s stock fell more than 20% in a day after its Feb. 15 earnings report, even as the company posted better fourth-quarter profits and saw engagement on its streaming platform grow to 80 million active accounts.
While some analysts continue to believe that Roku is simply facing growing pains as the advertising market recovers, others believe the company is now at a tipping point in the streaming wars. .
“We believe there has been growing strong evidence recently to support the view that Roku is under pressure from the emergence of challengers on all sides,” said Michael Nathanson, an analyst at Moffett Nathanson. It is written.
This view comes as Roku faces increased competition on the streaming advertising side due to new ad-supported services from Netflix and Disney, as well as the growth of free ad-supported services such as Pluto and Tubi. A strong new competitor joined Amazon when it rolled out ads to all Prime Video viewers in late January.
Roku introduced its own branded TV series in 2023 as a way to respond to the transition from devices to smart TVs, but Nathanson said Roku is “growing its operating market share” with Amazon and existing large OEMs. He said he believed they were facing “difficulties in sustaining their operations.” Maybe you just want to make your own TV.
And with rumors of Walmart’s acquisition of Vizio, a new potential competitor could be on the horizon. wall street journal reported on February 13 that the retail giant and the smart TV maker were in talks to potentially become an advertising and manufacturing giant.
“If Walmart is indeed successful in acquiring Vizio, we expect that its unparalleled relationships with the world’s biggest brands and its wealth of shopping data will also pose a significant challenge to Roku’s incumbent,” Nathanson said. said.
Roku CEO Anthony Wood said he couldn’t comment on rumors, but said on the company’s earnings call that Roku continues to do well in the space despite potential new entrants. He said that he believed that he was in a good position.
“We have a great relationship with Walmart. We have great relationships with many retailers. We have strong distribution in the United States and abroad. We have a large and loyal customer base. I have a base,” Wood said.
While acknowledging “short-term challenges in the macro environment and an uneven advertising market recovery,” Wood said he plans to grow the company’s revenue and cash flow in the long term and make 2024 a year of “innovation and growth.” Emphasized planning. Some analysts hold fast to that promise, still viewing Roku as an early leader and innovator in the streaming space. But as Macquarie analyst Tim Nolen pointed out, morale has taken a hit.
“Roku is well-positioned as the U.S. device share leader to capture CTV ad revenue, supported by continued strong engagement metrics. However, performance is currently mixed across many Qs, and enthusiasm remains low. some weakening,” he wrote in a Feb. 16 memo.
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