Roku Stock Price Drops Sharply Despite Positive Q4 Print

Shares of Roku, a major streaming company, lost more than 12% during yesterday’s trading session in New York despite the Q4 earnings that beat market estimates.

Fundamental analysis: Monetized video ad impressions more than doubled

Roku reported better-than-expected fourth-quarter results that beat analyst estimates. The California-based streaming company reported a loss of $0.13 per share, compared to $0.14 expected from the market.

Revenue came in at $411 million, easily beating analyst estimates of $392 million. Moreover, the revenue for 2019 was reported at $1.13 billion, compared to $1.11 billion expected from the market.

The management of the company said during the earnings call that the monetized video ad impressions more than doubled over the year, which provided a significant boost for Roku and its revenue.

Initially, shares of Roku gapped more than 7% to open higher on Friday. However, the disappointing 2020 guidance facilitated an increased selling pressure, which saw the stock ultimately close nearly 13% lower compared to its opening price.

The Roku expects that spending efforts would “continue to weigh on the bottom line”, prompting a disappointing earnings forecast for the future quarters.

Technical analysis: The big red candle

As seen in the chart below, the bulls couldn't hold their interest throughout Friday, which resulted in a long bearish candle that can have short-term consequences on the price action. Overall, the stock lost 6.33% on Friday.

Looking at the big picture, the price action is trading within a wedge. The bearish close on the daily chart forced the price below the 100-DMA and the down-slipping trend line around the $132. The short-term bearishness may continue, with the next target for the bears being $122 and $118.

On the upside, the broken 100-DMA will now act as a resistance. The mid-term resistance is the wedge upper line, currently sitting at $162.

Summary

Shares of Roku went on a roller-coaster ride to close more than 12% lower compared to the stock’s opening price on Friday. Despite the Q4 revenue and earnings that beat analyst estimates, investors weren’t impressed with disappointing earnings forecast for the future.