Benzinga - by Surbhi Jain, .
Shares of VIZIO Holding (NYSE:VZIO) closed lower on Wednesday amid a series of downgrades from Wall Street analysts.
- JPMorgan downgraded the stock to Neutral, while raising their price target to $11.50
- Craig-Hallum downgraded Vizio stock to Hold
- Roth MKM downgraded the stock to Neutral, lowering their price target to $11.50
We looked at JPMorgan’s view and reasons for their downgrade.
The Vizio analyst: JPMorgan analyst Cory A Carpenter downgraded Vizio stock from Overweight to Neutral, while raising the price target from $10 to $11.50 a share.
The Vizio Thesis: Walmart (NYSE:WMT) has announced its intention to acquire VIZIO for $11.50 per share in cash, totaling approximately $2.3 billion in equity value.
Also Read: Walmart’s Q4 Earnings Beat And Strategic VIZIO Buy Impresses Analyst, Says Shares Poised to Rise
Despite VIZIO shares trading at a 4% discount to the proposed acquisition price, Carpenter sees limited potential upside unless a superior offer emerges within the next 45 days.
The deal implies a roughly 15x multiple of the 2025 estimated adjusted EBITDA, contrasting with Roku (NASDAQ:ROKU) trading at around 27.5x. While competitors like Roku or Amazon.com Inc (NASDAQ:AMZN) could value VIZIO’s significant TV market share (around 15% in the US), any competitive bid may need to prioritize VIZIO’s SmartCast operating system.
The strategic rationale behind a Walmart and VIZIO partnership should amount to potential benefit for both companies, noted Carpenter.
Thoughts on Roku
Roku shares experienced a 32% decline in the past week due to a potential Walmart and VIZIO tie-up, making VIZIO a stronger competitor. While this may impact Roku’s partnership with Walmart’s house TV brand (onn.), the integration of VIZIO’s SmartCast operating system is not expected until 2025.
Although concerns exist about Roku’s shelf space, Carpenter anticipates minimal risk to 2024 estimates. Despite near-term challenges, the pullback offers a compelling entry point for longer-term investors, considering the ongoing growth in connected TV and Roku’s potential in the evolving streaming landscape.
Read Next: Why VIZIO Holding Shares Are Rocketing Premarket Tuesday
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Latest Ratings for ROKU
| Feb 2022 | Morgan Stanley | Maintains | Underweight | |
| Feb 2022 | Benchmark | Maintains | Buy | |
| Feb 2022 | Guggenheim | Maintains | Buy |
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