Wells Fargo Downgrades Roku to Equal Weight

Wells Fargo Downgrades Roku to Equal Weight

Wells Fargo downgraded Roku, Inc. from Overweight to Equal Weight on Friday, citing the streaming platform’s strong second‑quarter performance that lifted its internal estimates but left limited upside to its valuation as Roku moves toward its planned acquisition by Fox Corp.

The brokerage reduced its price target for Roku to $165 per share from $167 and values the transaction at $96 per share in cash plus $69 per share in Fox stock under the proposed deal, which is expected to close in the first half of 2027 with limited risk and no new bidder emerging. Roku’s share price closed at $154.08 on 13 August.

Wells Fargo raised its 2026 revenue estimate by 3.8% to $5.76 billion and its 2027 revenue estimate by 4.6% to $6.45 billion. It also increased its 2026 adjusted EBITDA forecast by 12% to $761 million, while cutting the 2027 adjusted EBITDA estimate to $837 million from $869 million, reflecting expectations of higher operating expenses to support device sales.

Roku reported second‑quarter platform revenue of $1.22 billion, a 25% year‑over‑year increase that beat Wells Fargo’s estimate by 4%. Subscriptions and other revenue grew 25.6% year‑over‑year. Adjusted EBITDA for the quarter reached $254.3 million, well above the brokerage’s estimate of $175.9 million, and free cash flow was $280.9 million.

Wells Fargo noted that advertising and subscription trends remain strong, with media and entertainment revenue continuing to improve. The firm estimated that political advertising could contribute about $161 million to Roku’s 2026 revenue, and that sports programming could support subscription growth in the second half of the year as the football season begins.

The brokerage flagged pressure on Roku’s device margins from higher chip and memory costs and indicated that sales and marketing spending could rise in the second half to support distribution and channel sales. It also highlighted that the second‑quarter device gross‑profit beat included an estimated $38 million pretax tariff refund.