(Bloomberg) -- Roku Inc. shares fell on Tuesday, with the stock retreating further from record levels in what analysts said was a reaction to the company’s massive year-to-date advance.
The stock dropped as much as 6.6% in what was on track to be its fourth straight decline, its longest losing streak since a six-day decline in April. Roku, a platform for video-streaming services, has lost about 12% over the four-day slump.
Even with the recent losses, the stock is up nearly 250% from a December low, and it hit record levels last week.
“There are plenty of examples of high-growth companies that are well positioned in popular sectors, where investors get ahead of themselves,” said Tom Forte, an analyst at D.A. Davidson who has a buy rating on the stock.
“Roku is in a very favorable position, where it can exploit the large investments being made by participants in the video category -- not just Netflix, but also Amazon, Apple and Disney,” he told Bloomberg in a phone interview. “As video ad revenue gravitates to where the eyeballs are, to [over-the-top] services and away from legacy, linear television, I think it has the ability to grow into its valuation.”
Roku’s stock has long been in a tug-of-war between its high levels of growth and a valuation that analysts often see as excessive. The stock can be extremely volatile, moving more than 20% following each of its past four quarterly results.
Roku’s second-quarter results are estimated to come out on August 7, according to data compiled by Bloomberg. Currently, analysts expect it to report revenue growth of more than 40%, a pace that’s expected to continue in the subsequent quarter, and then stay above 30% for the next two quarters.
This growth is seen as fueled by the company’s continued popularity with consumers at a time when streaming video has become a dominant part of the entertainment landscape. According to a Citi analysis of over-the-top services, the Roku Channel was the seventh most popular channel in May, up from ninth place in April.
“The market clearly believes Roku has nearly unlimited growth potential,” wrote Wedbush analyst Michael Pachter in a report dated June 24.
He added that while the company had built “an exceptional platform” and “has positioned itself as best in class for OTT advertising,” these factors were “fully priced in” the share price.
Wedbush has a neutral rating on Roku, but on Monday boosted its price target to $105 from $65.
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