Facebook also made a streaming play on Wednesday
Roku Inc.’s massive 2019 rally took a dent on Wednesday after a media giant, Comcast, made a move that undercuts the makers of streaming-media players.
Roku produces devices that receive an internet video streaming service and can route it to a television.
Comcast Corp. CMCSA, +0.58% announced Wednesday that it would be giving away its Xfinity Flex box for free to those who subscribe to the cable operator’s internet-only plans. With the Flex, customers will be able to watch streaming services on their television sets with a “curated” interface that highlights live and new programming.
Shares of Roku ROKU, -13.71% are off 11% in Wednesday trading, while Comcast’s shares are up 0.2%.
Roku got its start selling streaming-media sticks, and though the company now derives more than half of its revenue from things other than hardware sales, Roku’s newer revenue streams hinge on engagement with the platform. These include advertising revenue, cuts of subscriptions made on the Roku platform, and licensing deals with smart-TV manufacturers. The company said in its latest quarterly earnings letter that its operating system was found in over a third of all smart TVs sold domestically in the first half of the year.
The announcement of a free competing product from Comcast overshadowed some positive remarks on Roku from the analyst community. Guggenheim’s Michael Morris upped his target ahead of the announcement to $179 from $119.
“As the company expands its international offering and numerous new streaming video services launch with global growth ambitions, we see under-appreciated opportunity for the company to drive significant economic growth and create value for shareholders,” Morris wrote.
Facebook Inc. FB, +0.03% also made a play in streaming video on Wednesday, unveiling the $149 Portal TV, which lets users project video chats to their television sets as well as watch news programming.
Roku’s Wednesday stock plunge marks the second time in the last two weeks that shares dropped significantly on a competitor’s announcement. The stock fell 10.5% last Tuesday after Apple Inc. AAPL, +0.94% said that it would be giving away a free year of its new Apple TV+ service to those who purchase new iPhones, Macs, iPads, Apple TVs, or iPhone Touch devices. Since the Apple TV+ service will also be available for purchase through Roku, there was concern that Apple’s bundled offering would limit sign-ups through Roku and thus lower Roku’s ability to generate meaningful subscription revenue from the launch. Apple’s pricing for the service, at $4.99, also came in below expectations.
Roku shares remain up more than 300% on the year, as the S&P 500 SPX, +0.03% has risen 20%.