Shares of Roku Inc. ROKU, -3.91% are down 2.5% in premarket trading Friday after Wells Fargo analyst Steven Cahall downgraded the stock to equal weight from overweight. He also lowered his price target to $350 from $488. While Cahall still thinks that Roku has a “long runway” to improve its average revenue per user (ARPU), he said that this opportunity is now better understood by investors and thus reflected in many estimates. He noted that Roku’s ARPU beat for the second quarter “slowed a lot” relative to the first quarter. In addition, he worries that the competitive landscape from players like Amazon.com Inc. AMZN, -0.40%, Alphabet Inc. GOOGL, -0.21% GOOG, -0.13%, and Comcast Corp. CMCSA, +0.07% is picking up, and Roku came up short with its active account net additions in the most recent quarter. This could suggest that Roku’s “valuation is more constrained, especially if net adds aren’t accelerating,” Cahall wrote. His downgrade comes a day after a Guggenheim analyst upgraded the stock, citing the company’s international potential. Roku shares have lost 21% over the past three months as the S&P 500 SPX, -0.10% has risen about 4%.
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