Roku, the best-performing tech IPO this year may have just hit a wall

An analyst's stock downgrade had investors hitting the sell button for Roku.

Shares of Roku, which manufactures and ships its own streaming media hardware, tanked 13 percent on Tuesday. In Wednesday's premarket, it was down about 5 percent, at $35.14 per share.

The stock had surged 58 percent since its initial public offering in late September, making it the best tech IPO of the year and third best of 2017, according to Renaissance.

But on Tuesday, Oppenheimer analyst Jason Helfstein wrote in a note that the stock was "trading on non-fundamental factors" and excessively valued as a result. Helfstein downgraded Roku to an underperform rating, and gave it a price target of $28 — a 20 percent plunge from where the stock is trading right now.

Chantico Global CEO Gina Sanchez also weighed in on the view that the stock may have run too far, too fast.

"I think one of the reasons that a lot of analysts are taking a hard look at Roku is not only has it done well and delivered, but the liabilities on its balance sheet are actually growing quite quickly," she said Tuesday in a "Trading Nation" segment on CNBC's "Power Lunch." "So you have to pay attention to the total company right now, and we're still so early in the game [to determine] whether or not this company is going to be successful."

Roku more than doubled its share price after reporting earnings on Nov. 8. Even with Tuesday's plunge, the stock is still up 97 percent since the earnings report.

"Watching a company grow on the liability side means that they're sort of piling up cash to look good for their earnings reports, but not necessarily paying their liabilities," she added as a warning.

Wall Street analysts polled by FactSet tend to agree that the stock has run a little too far, too fast. The average price target by the five analysts who cover Roku is $27.20 a share. Three have hold ratings, one has a sell rating and two say buy.

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Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

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