After Mixed Results, Roku Sellers Are on the Wrong Side of the Trade

There’s a revolution happening today and at the forefront is streaming-video pioneer Roku (NASDAQ:ROKU). Folks who believe that the cable cord-cutting will only continue might want consider a long position in ROKU stock.

Roku logo displayed on tv screen in modern living room
Source: AhmadDanialZulhilmi /

Investors are always hungry for more data and Roku provided plenty in its recent quarterly fiscal report. However, not everybody viewed these results the same way.

Judging by the price action of ROKU stock, most investors apparently chose to view the glass as half-empty. That said, a closer look at the actual data should motivate some people to stay in the trade.

In the final analysis for this article, we’ll find that advertisers are still on board with the TV streaming movement. What’s more, although the company isn’t exactly perfect, Roku’s ability to generate revenues is still quite strong.

ROKU Stock at a Glance

If you should be watching any price level for ROKU stock, it’s the $500 mark. That’s because buyers have had great difficulty in surmounting that resistance point.

The bulls certainly tried to get the stock above $500 — not just once, but several times. This happened in February, June and July, but each time the buyers were rejected. They even got ROKU stock up to $490.76 on Jul. 26, but that was followed by a sharp price decline. On Aug. 30, the stock opened at $356 and change.

So, it’s a good idea to keep your eye on ROKU anytime it gets close to $500. There’s an old but often true notion among market technicians — with a strong breakout, today’s resistance level can become tomorrow’s support.

Roku Handily Beat Estimates

Looking at this company’s recent quarter, it’s easy to start with the good news because there’s so much of it. In fact, there’s enough positive data to make the drawdown in ROKU stock seem irrational.

But hey, that’s how great opportunities happen, as enterprising investors can capitalize on unduly bearish share-price moves.

So, for starters, the consensus estimate for Roku’s second-quarter 2021 per-share earnings was 13 cents. The company handily beat that prediction by posting 52 cents per share.

In terms of quarterly revenues, analysts were also modeling $618 million. However, the actual result was a Street-beating $645 million.

Need more positive data? No problem — just sit back and enjoy these Q2 fiscal stats:

  • Gross profits were up 130% year-over-year (YOY) to $338 million
  • Total net revenues increased 81% YOY to $645 million
  • Platform revenues rose 117% YOY to $532 million
  • Active accounts reached 55.1 million, marking an increase of 1.5 million active accounts from Q1
  • Average revenues per user (on a trailing 12-month (TTM) basis) grew to $36.46, up 46% YOY

Streaming Hours Didn’t Go Over Well

Any reasonable investor should celebrate those results, right?

Well, it’s not as simple as that. Apparently, one detail may have caused traders to dump their ROKU stock in after-hours trading — to the point that the share price fell some 8%.

As it turns out, Roku’s Q2 streaming hours totaled 17.4 billion. That signifies a decrease of 1 billion hours compared to Q1. The company provided a reasonable explanation for this result:

“Consumers sought increased out-of-home entertainment activities (such as dining and travel) in Q2 as a result of pent-up demand and the loosening of COVID-19 restrictions, which led to a broader secular decline in overall TV viewing hours.”

But this phenomenon won’t last forever. There won’t always be such strong, post-pandemic pent-up demand for out-of-home activities. And besides, it’s not as if people abandoned Roku altogether. On a YOY basis, Roku’s global streaming hours still increased by roughly 19% during Q2 2021.

Meanwhile, there was a “nearly 19% decline in traditional TV consumption and a nearly 2% decline in TV streaming across all platforms,” for persons of two years of age or older in the United States.

The Takeaway on ROKU Stock

All in all, Roku’s quarterly results demonstrated both resilience and growth.

Sure, some investors opted to focus on the negative data. But they’ve outright dismissed the other exceptionally positive results.

People can react however they so choose. However, you also have the right to hold ROKU stock if you see the share-price reduction as irrational and temporary. To me, that’s what it appears to be.

On the date of publication, Louis Navellier had a long position in ROKU. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.

The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.

Louis Navellier, who has been called “one of the most important money managers of our time,” has broken the silence in this shocking “tell all” video… exposing one of the most shocking events in our country’s history… and the one move every American needs to make today.

Article printed from InvestorPlace Media,

©2022 InvestorPlace Media, LLC