Roku Earnings: Solid Results, but Cautious Outlook and Vizio/Walmart Rumors Weigh on the Stock

Roku's fourth-quarter results exceeded our expectations, and the firm is well ahead of schedule to reach profitability. We think the significant stock decline in after-hours trading was a major overreaction to a muted outlook for the next quarter and some cautious commentary. However, we think the stock had gotten ahead of itself, and the market is also skittish about rumors that Walmart is looking to acquire Vizio, a major Roku competitor. We're maintaining our $75 fair value estimate, leaving the stock fairly valued after the selloff.