Typically subject to the crosswinds of Wall Street, Roku stock has declined more than 7% to around $91 a share since Tuesday, when the Wall Street Journal reported that Walmart is in talks to possibly buy smart TV maker Vizio for around $2 billion.
Also read: Analyst Says Walmart Buying Vizio Could ‘Disrupt’ CTV Market
While Vizio stock soared in the immediate aftermath of the WSJ story, up over 25% as Broadcasting+Cable reported Tuesday, Roku's latest rush of investor momentum, accrued with the Roku heading into its full-2023/Q4 earnings report on Thursday, was crushed. (Roku stock had been up nearly 9% since the beginning of 2024.)
Influential equity research firm MoffettNathan advised readers in a late Tuesday afternoon investor note to sell Roku stock.
Walmart accounts for 40% of Roku device sales, principal analyst Michael Nathanson wrote, with Roku's TVOS not only powering Walmart's house brand, Onn, but also budget-priced sets manufactured by makers including TCL and Hisense. Roku also moves a lot of player pucks, dongles and HDMI sticks through Walmart.
"A purchase of Vizio would allow Walmart to prioritize their product over competing low-end sets," Nathanson said.
Of more concern to Roku is the "platform" side of Roku's business, which accounted for more than 86% of its revenue in the third quarter of last year. Walmart's entry would create another powerful competitor for Roku in the connected-TV advertising market.
"Walmart's reported move to acquire Vizio can be seen as a challenge to the CTV advertising landscape as they can also marry first-party data with full-funnel ad inventory," Nathanson wrote. "Walmart and Amazon both have the ability (and assets) along with Alphabet's YouTube to be highly disruptive to CTV incumbents.
"Ironically, while our negative thesis on Roku (sell, $66 PT) is based on increasing competition from better capitalized rivals, we did not think Walmart was one of those competitors," the analyst added.
