Sell shares of Roku as the media player manufacturer faces pressure from increasing competition and a worsening macro backdrop, according to MoffettNathanson. The firm downgraded Roku to underperform from market perform, and kept its price target, after the streaming company reported disappointing second-quarter earnings results last month. Roku missed expectations on both the top and bottom lines, citing supply chain issues that dampened sales of Roku devices, as well as deteriorating advertising demand. Shares closed down 23% on the day of the results, but have rebounded 19% this month. “We now find ourselves in a similar position with long-term estimates that are below consensus and a stock that has surprisingly bounced back after an incredibly weak 3Q 2022 revenue guide,” read a Wednesday note from Michael Nathanson. “We see Roku’s competitive position challenged from all sides with investment spending a necessity to remain competitive.” Nathanson said he found that Roku’s core non-remaining performance obligation (RPO) business is in “an even weaker condition than we had anticipated” after reviewing the company’s 10Q and other disclosures following the earnings results. Roku is also dealing with worsening advertising demand just as it has to compete with new entrants in the streaming wars for content. Video advertising is currently a 50% gross margin business for the company, the note read. “We also question the stability of Roku’s video advertising gross margins given elevated content spending needed to compete against other streaming services,” Nathanson wrote. MoffettNathanson maintained a price target of $62, implying a roughly 20% decline from Tuesday’s closing price of $78.10. Shares of Roku are already down 65% this year. Roku fell nearly 2% in Wednesday premarket trading. —CNBC’s Michael Bloom contributed to this report.