Roku Inc. (NASDAQ:ROKU) slid Thursday after Jefferies downgraded to an underperform rating, saying that consensus estimates are failing to account for a slowing advertising market.
According to The Motley Fools, the ad scatter market has been abysmal, and that led to some poor growth numbers for the business of late.
To help address the issue, the company recently announced a big move that could change its business and make it less dependent on ad revenue. How should investors react to this latest effort?
Roku's business centers around its popular streaming sticks that people can use to convert a regular TV into a smart TV that can use apps and easily access multiple streaming platforms, like Netflix or Disney +. Roku even has its own channel that offers free content.
Of late, the company has said it wants more control over the biggest screen in your house.
After years of licensing its operating system and offering reference designs to manufacturers, Roku's coming out with its own television sets. The streaming company recently unveiled a new line of TVs that will be available later this year.
There are several reasons for Roku's departure in strategy from purely partnering with manufacturers to becoming a competitor in its own right. Here are three investors should know. The company could undercut the competition on price, could sell TVs (that) “will enable further innovation around the TV experience.", and could provide investors with a revenue boost.
Shares in ROKU retreated $2.19, or 4.5%, to $46.78.
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