A video sign displays the logo for Roku Inc, a Fox-backed video streaming firm, in Times Square after the company’s IPO at the Nasdaq Market in New York, U.S., September 28, 2017.
Brendan McDermid | Reuters
RBC Capital Markets lowered its rating on Roku to sector perform from outperform after the stock has nearly tripled this year.
Roku shares fell 2.9% in premarket trading on Tuesday from its previous close of $91.37 a share.
“Given what we view as sustainably robust growth and profitability levels, we believe ROKU’s YTD outperformance is fully justified,” RBC analyst Mark Mahaney said in a note to investors on Monday. “However, with the stock now trading at an intrinsically robust multiple [of 11 times its price to sales ratio], we see risk–reward as less compelling. Hence the downgrade.”
Roku has “dramatically outperformed the market,” Mahaney noted, as the stock climbed 198.2% so far this year through Monday vs. the S&P 500‘s gain of 18%. RBC did not adjust its $90 price target on Roku shares.
“Given our view here, we would be constructive again on any major stock pullback, Mahaney added.
– CNBC’s Michael Bloom contributed to this report.