Shares of Roku (ROKU) are under pressure after MoffettNathanson analyst Michael Nathanson downgraded the stock to Sell and lowered his price target to $220 from $330 as he thinks estimates are "just too damn high." Nathanson also noted that "in digging through" the company's latest quarterly filing, the signs of slowing revenue growth are "even more obvious".

SELL ROKU: MoffettNathanson analyst Michael Nathanson downgraded Roku (ROKU) to Sell from Neutral with a price target of $220, down from $330. "Simply put, we think our and the Street's long-term revenue and earnings estimates are just too damn high," Nathanson told investors in a research note. Roku will need to monetize an "absurdly high portion of long-tail" ad-based video on demand impressions to come even close to Street estimates, the analyst said. He believes this will be a challenge given rising competition and sees signs of slowing revenue growth at Roku. Nathanson argues that "in digging through the latest 10-Q," the signs of slowing revenue growth are "even more obvious."

While the analyst is lowering his target 2025 revenue multiple from 5-times to 4-times, more importantly, he is also decreasing his 2025 revenue estimate by 17% due to lower estimated video advertising revenues.

RESULTS: Earlier this month, Roku reported third-quarter earnings per share of 48c, which was better than the expected 6c, and revenue of $680.0M, below consensus estimate of $683.4M. The company also reported third-quarter platform revenue up 82% to $583M and said that Active Accounts reached 56.4M, up 1.3M from second quarter. Streaming hours were up 0.7B from second quarter at 18.0B, and Average Revenue Per User, ARPU, was up 49% year-over-year to $40.10.For the fourth quarter, Roku sees revenue between $885M-$900M and adjusted EBITDA of $65M-$75M.

"Looking ahead, our business fundamentals remain strong but we are mindful that the challenges created by the global supply chain disruptions will likely continue into 2022. These headwinds may have a broad impact on the holiday season in terms of consumer confidence, product pricing, and availability, and advertising spend levels. While the pandemic has had different impacts on different parts of our business, the secular shift to streaming remains intact. Our Q4 outlook is for strong growth with total net revenue of $893 million at the midpoint (up 37% year-over-year). We continue to see a large opportunity ahead of us and are investing in headcount, product development, and sales & marketing to drive future growth. We anticipate these investments will increase operating expenses on a sequential basis and as a result, we expect Q4 adjusted EBITDA to be $70 million at the midpoint in Q4," the company said.

PRICE ACTION: In morning Wednesday trading, shares of Roku have dropped more than 9% to $250.97.