Wells Fargo expects Roku softness in Q4

Analysts at Wells Fargo cut the firm’s Roku (NASDAQ:) price target to $70 from $84 per share, maintaining an Equal Weight rating on the stock in a note Wednesday.

They told investors they are expecting softness in the fourth quarter from the audio and video equipment manufacturing company.

“ROKU pre-announced Q3, but we think Q4 could see softness from ad trends,” the analysts wrote. “We heard at our Advertising Day last month that scatter remains weak Q/Q, while ROKU will also face a reduction in M&E spend due to the ongoing Hollywood strikes. We expect Q4 rev per streaming hour to fall -8% y/y vs -4% y/y in Q3.”

“We trim Q4 Platform revenue by 1% to $780mm, or -3% vs street, for total revenue of $929mm (+7% y/y and -3% vs street). Our Q4 gross profit estimate is now $379mm, or -6% vs street (rev cut dropping through),” they added.

Wells Fargo expects Roku’s Q3 to be in line, while it believes the big debate is the company’s 2024/2025. Furthermore, they said, “ROKU does not lend itself to typical valuation frameworks,” so they expect the stock to follow estimate revisions.

Roku shares are down more than 1.5% premarket.