Walmart's acquisition of Vizio threatens the prospects of Roku (ROKU.US). Fuguo Bank recommends "reducing holdings."

Wall Street major bank Wells Fargo has downgraded the stock rating of the leading US streaming device company Roku (ROKU.US) from "hold" to "sell", and significantly lowered its target price from $77 to $51. As a result, Roku's stock price fell over 4% to $61.750 in pre-market trading on Tuesday. Analysts at Wells Fargo stated that retail giant Walmart (WMT.US) accounts for about one-third of Roku's total device sales/net additions, and Walmart's acquisition of Vizio (VZIO.US) is mainly to acquire Vizio's SmartCast operating system. As part of the acquisition agreement, Walmart will now own the Vizio SmartCast operating system, which has 18 million active accounts. The system is embedded in all Vizio TVs and can connect to Apple and Amazon smart systems. Wells Fargo pointed out that Walmart's acquisition of Vizio may put significant pressure on Roku's net additions in 2025-26, and Walmart may shift its online TV platform from ROKU O/S to SmartCast. Analysts believe that due to this significant shift in the competitive landscape, Roku's market scale will need to be repositioned. Wells Fargo also suggested that Roku and Walmart may continue to collaborate on shoppable advertising, and Walmart is likely to transition its Walmart Connect to the SmartCast installation base. By focusing on providing advertising services in its physical stores and various online platforms, Walmarts core objective in acquiring Vizio is to expand its influence in the streaming advertising field and challenge Amazon's leadership in the advertising sector. Walmart sees the potential in generating direct revenue through Vizio TV advertisements. Vizio's SmartCast operating system has over 18 million active accounts, allowing Walmart to advertise on Vizio TVs without restrictions and create exclusive shopping and entertainment options for Vizio TV owners. The analyst at Wells Fargo also mentioned that Walmart, Best Buy, and Amazon are Roku's three major channel partners. However, with Walmart now having its own connected set-top box operating system, Best Buy needs to continue collaborating with Roku as it is not a media/advertising company, while Amazon may still be interested in collaboration. Nevertheless, Amazon already provides content/advertising services through Prime Video, FireTV O/S, and related device supply chains. Wells Fargo believes that Walmart's acquisition of Vizio has led to a "market reevaluation" of Roku's fundamentals, requiring investors to take the time to reassess the narrative logic of valuation.