VIZIO Faces Analyst Downgrades Amid Walmart Acquisition, Impact On Roku

Zinger Key Points
  • VIZIO Holding faces downgrades from Wall Street analysts following Walmart's $2.3 billion acquisition announcement.
  • Roku shares also experienced a 32% decline due to the VIZIO-Walmart tie-up, presenting challenges but a compelling entry point.

Shares of VIZIO Holding 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

A review of ratings and analysis (both fundamental and technical) by Benzinga also indicates Vizio to be a very unpromising asset.

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 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 ROKU trading at around 27.5x. While competitors like Roku or Amazon.com Inc 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

Photo: Shutterstock

Market News and Data brought to you by Benzinga APIs
Comments
Loading...
date
ticker
name
Price Target
Upside/Downside
Recommendation
Firm
Posted In: Analyst ColorM&ATop StoriesAnalyst RatingsExpert IdeasStories That Matter
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!