Why Roku Stock Is Down By 28% Today

Roku Stock Dives After Earnings Report

Shares of Roku gained strong downside momentum after the company released its fourth-quarter results. Roku reported revenue of $865.3 million and GAAP earnings of $0.17 per share, missing analyst estimates on revenue and beating them on earnings.

The company reported that Active Accounts reached 60.1 million, up by 8.9 million from Q4 2020. Average Revenue Per User (ARPU) grew by 43% on a year-over-year basis.

In Q4 2021, player unit sales declined by 4% on a year-over-year basis, serving as a significant bearish catalyst for Roku stock. In addition, the company’s guidance disappointed analysts. In Q1 2022, Roku expects to report revenue of $720 million and adjusted EBITDA of $55 million.

The company also noted that ongoing supply chain disruptions would continue to impact the economy and that overall TV unit sales would likely remain below pre-pandemic levels, which could have an impact on the active account growth.

What’s Next For Roku Stock?

Analysts expect that Roku will report earnings of $1.63 per share in 2022, so the stock is trading at more than 60 forward P/E for this year despite the massive pullback.

In the current market environment, traders are very sensitive to any negative news from growth companies. In Roku’s case, there’s too much bad news in one report. Player unit sales declined on a year-over-year basis, revenue missed estimates while Q1 2022 guidance was below analyst expectations. A combination of these negative factors led to massive pressure on Roku stock.

It should be noted that Roku stock has already lost almost 80% of its value from the highs that were reached back in mid-2021. However, the company is still not cheap at a time when the market is ready to punish high-PE stocks for any shortcomings.

In case the broad market pullback continues, Roku stock may gain additional downside momentum and settle below the psychologically important $100 level. Traders should also watch the dynamics of ARK Innovation ETF, which has recently moved to new lows. A panic sell-off in ARKK will signal that its holdings like Roku have more room to fall.

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