Tech

Roku downgraded, sinks on report that Amazon is betting big on streaming TV ads

Key Points
  • Roku's stock was down 6 percent on reports that Amazon is looking to expand its streaming service.
  • Guggenheim downgraded the stock.
  • Roku had a strong fourth-quarter, beating on the top and bottom lines, despite more streaming services from AT&T, Disney, Apple and NBCUniversal, set to launch in 2019 and 2020.
Anthony Wood, founder and chief executive officer of Roku Inc.
David Paul Morris | Bloomberg | Getty Images

Shares of Roku ended the day down 6 percent on Thursday as traders reacted to a report from Cheddar that Amazon is planning to beef up advertising on its streaming TV products. Meanwhile, Guggenheim downgraded the stock Thursday morning. The stock was down as much as 9 percent during its lows of the day.

Amazon is seeking million of dollars from advertisers to help grow its Fire TV platform to compete with Roku and Pluto TV, Cheddar reported. Amazon is reportedly asking for cable-network sized dollar amounts for its ad space, but marketers have been hesitant without knowing the content Amazon is going to put on its channels. Amazon's new TV content is expected to be available in the fall.

As is common for analysts to worry about Amazon being a larger presence and potential disruptor in any space, Guggenheim downgraded Roku to a neutral from buy and lowered its target from to $72 from $77.

"We believe that the Apple video product unveiled on March 25 represents an additional risk to Roku's active user base (even as the platform includes The Roku Channel) while Amazon's and Viacom's greater pushes into advertising video on demand (AVOD) are increasing competition," Guggenheim said in a note Thursday.

Guggenheim recognized the value in Roku's user base, an estimated 28.6 million active accounts, however, analysts said the value is already baked in to its market capitalization. Plus, Amazon's Fire TV has 30 million active users to date.

Roku had a strong fourth-quarter 2018, beating on the top and bottom lines, despite more streaming services from AT&T, Disney, Apple and NBCUniversal, set to launch in 2019 and 2020.

Roku's stock is up more than 100 percent year to date.

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