Will Roku suffer the same fate as Netflix after announcing results?

By: Motiur Rahman
Motiur Rahman
Md Motiur is a Financial Analyst at Invezz covering the North American, European and Asian stock markets. He has… read more.
on Apr 21, 2022
  • Roku will announce Q1 earnings on April 28.
  • Previous guidance signaled slower growth in revenues but the guidance is already discounted by the market.
  • Though the stock nearly bottomed out at $109, let’s wait for Q1 earnings before buying.

Roku Inc. (NASDAQ:ROKU) will announce Q1 earnings on April 28. The announcement comes a week after Netflix (NASDAQ:NFLX) shocked Wall Street with a 200,000 dip in subscriber count. Streaming shares have been on a decline, pushing Roku to a valuation of $109. Given the jitters in the market, Roku investors would want to know what awaits them in the earnings call.

Roku gave guidance for slower revenue growth of 33%. This information was priced into the stock, explaining why the share has been declining. However, with recent experience from Netflix, investors are concerned that the performance of Roku could be much worse.

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This analysis presents the view that Roku is unlikely to record the same sharp decline experienced by Netflix. For the latter, the subscriber count decline was due to a strategy gone wrong. The decline came after Netflix targeted the sharing of passwords. This analysis, therefore, finds that it is unlikely that Roku faces similar challenges. However, it is important to be wary of market risk for the streaming sector.

Roku to remain suppressed until Q1 earnings on April 28

Source – TradingView

Roku has consolidated at a valuation of around $115. At the price of $109, Roku is trading slightly below the baseline. This analysis considers that Roku will find support at $101 for the coming seven days before the results.

After the earnings call, investors will be highly critical of performance figures. If the performance meets expectations, then the valuation would rally to levels between $120 and $125. In the event that the results are dismal, then the stock would crash in a way similar to Netflix.

Summary

Roku will announce earnings on April 28 against the backdrop of a crashing streaming market. The soft underbelly of the streaming industry was revealed by the loss of subscribers at Netflix. Investors can hold to the earnings date.

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