Morgan Stanley analyst Benjamin Swinburne downgraded Roku (ROKU) to Underweight from Equal Weight with a price target of $110, up from $100.
The shares closed Friday down $1.27 to $160.37.
Roku continues to execute a "sound strategy" to capitalize on the shift to streaming, but there are risks to growth expectations not reflected in current valuation levels, Swinburne tells investors in a research note. Specifically, he thinks the company's revenue and gross profit growth could slow "meaningfully" in 2020, leading to multiple compression. Swinburne is bullish on Roku's growth prospects, but he notes the shares are up over 400% year-to-date due to rising estimates and overall exuberance over all things streaming. As a result, the stock's risk/reward is skewed to the downside, contends the analyst.
He points out that Roku's valuation levels have surged past digital media players and even past high-growth software-as-a-service companies.
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