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Why Roku Shares Fell 23% in January

By Evan Niu, CFA - Feb 7, 2018 at 2:19PM

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The streaming platform operator got hit with two analyst downgrades in two days after coming off highs set in December.

What happened

Shares of Roku (ROKU 2.85%) fell 23% in the month of January, according to data provided by S&P Global Market Intelligence. The move was largely attributable to two analyst downgrades, but there were other developments during the month as well.

So what

The company got hit with two downgrades in two days in the first week of January, with analysts expressing concern over Roku's stretched valuation as well as the dominance of Netflix and YouTube. Those two channels represent a disproportionate number of hours streamed on the platform, which Roku does not monetize.

A movie listing on Roku

Image source: Roku.

Meanwhile, shares had hit a high of nearly $59 in December, making the valuation look a bit lofty.

Now what

On the bright side, Roku announced that it had 19 million active accounts at the end of 2017, based on preliminary data. That would represent 2.3 million more active accounts than the company had at the end of the third quarter, suggesting holiday hardware sales fared well.

The stock stabilized near the end of January after it announced a new Ad Insights offering that would help advertisers better measure their ad campaigns, while prominent hedge fund Citadel disclosed a 5.6% passive stake in the company. That vote of confidence from a well-known institutional investor helped reassure public investors.

Roku will announce fourth-quarter earnings results on Feb. 21.

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