Should you buy Roku as earnings meet expectations and shares rise?

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 29, 2022
Updated: Apr 30, 2022
  • Roku announced growth in revenues from $574.2 million to $733.7 million
  • Total active accounts increased by 1.1 million to 61.3 million
  • Buy Roku as growth remains strong

Roku Inc. (NASDAQ:ROKU) is up 7.16% this week after Thursday’s earnings release. The company’s Q1 earnings fell to a $0.19 loss, at par with analyst projections. The revenues were up from $574.2 million to $733.7 million. Most notably, Roku added 1.1 million accounts to reach 61.3 million active accounts.

While Roku reported losses, the stock is on a strong growth trajectory. The growth is even more important as its peer, Netflix, reported a loss in subscribers. Roku could easily chip away the market share of Netflix.

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Investors will be observing to see how the stock performs in the coming months. The company projects Q2 revenues at $805 million, while analysts see higher sales of $823 million. The company also expects to hit a breakeven level for its EBITDA in the second quarter. Roku has a clear tendency to meet analyst expectations. Consequently, investors should be keen on the stock.

Roku is trading below averages but the trend might reverse

Source – TradingView

From a technical perspective, Roku’s share price is below the moving averages. MA-10 is $99.33, with MA-20 at 109.71. The 50-day average is $117. With slow but sure gains for two weeks consecutively, Roku may reverse the declining trend. The expectations of strong growth in revenues are likely to push the stock’s valuation to $120.

Summary

The strengths of Roku continue to manifest in the growth of active accounts and revenues. Though the share price remains below moving averages, the company is gaining surely and steadily. For long-term focused investors, Roku is a buy given the strong fundamentals.

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