A video sign displays the logo for Roku, after the company’s IPO at the Nasdaq Market in New York, September 28, 2017.

Brendan McDermid | Reuters

Morgan Stanley lowered its rating on Roku to underweight from equal weight on Monday, saying the stock’s phenomenal climb this year fully reflects the company’s growth prospects and fails to recognize some key risks.

Roku shares slipped nearly 7% in premarket trading.

“Roku shares are up over 400% YTD due to rising estimates and overall exuberance over all things streaming. As a result, we see the risk/reward skewed to the downside. Roku’s valuation levels have surged past digital media players and even past high-growth SAAS [software as a service] companies … despite structurally lower gross margins,” Morgan Stanley analyst Benjamin Swinburne said in a note to investors. The note was titled, “It’s all priced in.”

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