Why Roku Stock Is Down By 7% Today

Roku Stock Falls As General Manager Of Platform Businesses Announces His Departure

Shares of Roku gained downside momentum and moved to multi-month lows after the company announced that Scott Rosenberg, who served as Senior Vice President and General Manager of Platform Business, would step down in the spring of 2022. Rosenberg joined Roku back in 2012.

Such news are often viewed as a material downside catalyst when the stock is already in a downside trend. In Roku’s case, the shares have moved from the $474 level in July 2021 to the $180 level as traders questioned whether the company’s valuation was justified.

Back in December 2021, the stock made an attempt to gain upside momentum after the company reached a deal with Google to keep YouTube and YouTube TV apps on Roku, but this positive development failed to serve as a longer-term upside catalyst for company’s shares.

What’s Next For Roku Stock?

While Roku stock declined by more than 60% from the highs that were reached back in July, valuation remains a concern. Analysts expect that Roku will report earnings of $1.67 per share in 2022, so the stock is trading at roughly 108 forward P/E despite the huge pullback.

The Fed is about to raise rates while Treasury yields are already moving higher, which is a challenging environment for high-PE stocks. Not surprisingly, tech leaders have been under material pressure in recent trading sessions.

There is another thing to consider when looking at Roku stock. Roku is the second-largest holding of Cathie Wood’s ARK Innovation ETF, which has been moving lower at a fast pace in recent months.

Back in 2020 – early 2021, the sole fact that ARKK owned a share in the company used to serve as an upside catalyst. In early 2022, the reverse may be true, especially in case the fund’s main investment, Tesla, has any problems.

At this point, Roku remains a risky investment as the company remains richly valued in an environment where traders start to pay attention to valuation.

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