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Pivotal Research Group Downgrades Roku Stock to 'Sell'

Pivotal Research Group downgraded its rating on Roku stock from “hold” to “sell,” citing “frankly awful” Q2 results and Q3 guidance of $700 million, analyst Jeffrey Wlodarczak wrote investors Monday, saying Roku “appears to be getting hit materially harder than…

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its peers.” The streaming platform company withdrew its full-year revenue guidance on a July earnings call on "recessionary fears, inflationary pressures, rising interest rates, and ongoing supply chain disruptions." Wlodarczak cited heightened expenses in the first half including a long-term 250,000-square-foot lease in Times Square, “what we view as an inevitable recession” and “the fully penetrated" U.S. and Canadian markets indicated by Q2 subscriber results. Roku added 1.8 million active accounts in the quarter, bringing the count to 63.1 million (see 2207290024). “Streaming is an important growing market medium/long term and if Roku is back on its heels for the next 9-12 months it gives well capitalized existing and new players an opportunity to take share (potentially through much more aggressive offers)," Wlodarczak said. Roku said it acted in Q2 to "significantly slow" operating expense and headcount growth.