Why Roku Stock Was Falling Today
What happened
Shares of Roku (NASDAQ: ROKU) were pulling back today as the stock reacted to the broad sell-off in the market due to interest rate hikes and a weak retail sales report. And one analyst issued a bearish note on Roku as well.
As a result, the stock was down 7.3% as of 2:34 p.m. ET on Thursday, while the S&P 500 was down 2.6%.
So what
In a note this morning, Cleveland Research said channel checks on the streaming platform show that the company is seeing pressure in the fourth quarter, and it expects results to come in slightly below consensus. The research firm also lowered estimates for 2023 to below consensus and sees the streaming stock underperforming its peer group. Cleveland maintained a neutral rating on the stock.
The comments are the latest negative data point for Roku stock, which has plunged sharply this year as growth has slowed and losses have mounted after the company stepped up investments in the business during the pandemic boom.
In fact, management guided for negative revenue growth in the fourth quarter as advertisers have pulled back on spending, and the consensus for the current quarter calls for revenue to decline by 6.4%.
Also today, a report came out showing that Netflix's ad tier is off to a slow start, which could present residual headwinds to Roku, and the company is still negotiating with Disney to put the Disney+ ad tier on its platform.
Meanwhile, interest rate hikes today and yesterday from the Federal Reserve, Bank of England, and the European Central Bank show that central banks are still tightening monetary policy in order to slow down economic growth and bring down inflation.
Now what
Roku is still the leading streaming platform in the U.S. and a major player in international markets. Despite the current challenges, the company appears to have a bright future since there's still a lot of growth left in connected TV, especially with Netflix and Disney+ just launching their ad tiers.
Still, with macroeconomic headwinds continuing to build, things might get worse for Roku before they get better.
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Jeremy Bowman has positions in Netflix, Roku, and Walt Disney. The Motley Fool has positions in and recommends Netflix, Roku, and Walt Disney. The Motley Fool recommends the following options: long January 2024 $145 calls on Walt Disney and short January 2024 $155 calls on Walt Disney. The Motley Fool has a disclosure policy.
