Citron Calls Roku A 'Total Joke'

Notable short seller Citron Research Tweeted on Tuesday that Roku Inc ROKU is a bubble that could move "much lower."

What You Need To Know

Citron cited RBC analyst Mark Mahaney, who has a $28 price target on Roku, and that Needham's Laura Martin's $50 price target is "irresponsible."

"Unless $ROKU finds a way to stream a BTC - this stock is MUCH LOWER...caveat emptor," the Tweet said.

Citron didn't follow up with a justification for its thesis (although Andrew Left will appear on CNBC Wednesday afternoon), but data from FIS Astec Analytics may confirm Citron's short stance. Astec Analytics offers up-to-date, intraday short selling market insight via securities lending analytics and identified Roku as one of the hottest stocks being shorted by investors.

After Roku's stock bottomed at $15.75, many investors are sitting on triple-digit percentage gains as shares closed last week at $39.47. However, many short investors are aware the company is unlikely to earn a profit until 2020 and the stock by some metrics is bloated. Specifically, Roku's stock is trading at a price to earnings ratio of 7.2 compared to Netflix, Inc. NFLX at 7.3 and Apple Inc. AAPL at 3.2.

Why It's Important

"Short sellers, despite closing off around 10 percent of their open positions in the last week, have seen utilization grow by more than 10 percent as supply has been contracting, probably as a result of early investors banking their gains," Astec Analytics said in a report. "Significant short interest remains, positioned to take advantage of any bursting bubbles as Roku."

What's Next?

Roku's stock hit a new 52-week high of $51.80 on Tuesday but Citron's Tweet may have hampered the sentiment as shares were seen trading at $47.25, up just 2.4 percent on the day at time of publication.

Related Links:

Here's Why Roku's Volatility Is OK With This Equity Strategist

Expert: Roku's Post-Q3 Run Could Be Masking Balance Sheet Concerns

Image Credit: Mattnad - Own work, CC BY-SA 3.0, via Wikimedia Commons