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ROKU Stock Alert: Roku Plunges 20% After Dire Warning

  • Roku (ROKU) stock is tumbling over 20% in early trading.
  • The company reported weaker-than-expected second-quarter results and provided guidance that also missed analysts’ average estimates.
  • Analysts reacted negatively to Roku’s results.
ROKU stock - ROKU Stock Alert: Roku Plunges 20% After Dire Warning

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Roku (NASDAQ:ROKU) stock is tumbling over 20% in early trading after the company reported weaker-than-expected second-quarter results. Further, Roku warned that advertisers had meaningfully reduced their spending on TV ads in Q2, adding that it expects the downturn “to continue in the near term.”

ROKU Stock: Q2 Results and Q3 Guidance

Roku reported a per-share loss of 82 cents, worse than analysts’ average estimate of a loss per share of 69 cents. The company’s revenue came in at $764.4 million, below the average outlook of $804.54 million.

On the positive side, however, Roku’s revenue did increase 18.5% year-over-year. Its platform revenue jumped 26% YOY and its average revenue per user climbed 21% versus the same period a year earlier. However its expenditures soared 73% YOY, reaching $466 million.

“In Q2, we added 1.8 million incremental Active Accounts to reach 63.1 million,” the company noted, adding that: “In Q2, the Roku operating system (OS) remained the No. 1 selling smart TV OS in the U.S.”

On the guidance front, Roku expects to generate $700 million of revenue in third quarter, well below analysts’ mean outlook of $902.66 million. Moreover, it expects its gross profit to dip to $325 million from the $364 million of gross profit that it generated in Q3 of 2021.

Analysts Reacted Negatively to Roku’s Results

Evercore ISI’s Shweta Khajuria downgraded ROKU stock to “in-line” from “outperform.” Khajuria believes, however, that Roku’s “business is not broken,” while its challenges have arisen mostly because of negative macro developments. She remains upbeat on its long-term outlook, but slashed her price target on the shares to $75 from $140.

Also downgrading the shares was Susquehanna’s Shyam Patil, who cut his rating on ROKU stock to “neutral” from “positive.” Although Roku is still poised to succeed in the expanding connected TV market, “challenges such as rising inflation and supply chain disruptions are having a severe impact on the business” and “are likely to persist in the near-term.” He slashed his price target on ROKU stock to $70 from $200.

On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been PLUG, XOM and solar stocks. You can reach him on Stocktwits at @larryramer.

Article printed from InvestorPlace Media, https://investorplace.com/2022/07/roku-stock-alert-roku-plunges-20-after-dire-warning/.

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