Worse-Than-Expected Loss Makes Roku Stock a No-Go
Streaming device company Roku (NASDAQ:ROKU) recently released its second-quarter 2022 financial results. Immediately after those results were made public, ROKU stock plummeted. The company tried to spin its results as positive, but Wall Street’s clearly not buying it.
It’s been a busy earnings season, and there have been some big winners and some huge losers along the way. Roku is a representative of the current streaming market, so traders watched for the company’s quarterly results with anticipation.
What followed the data release was jaw-dropping, and not in a good way. Roku’s investors were already having a rough 2022, and the company’s inability to match the Street’s expectations means the shares may continue to lose value quickly.
What’s Happening With ROKU Stock?
A good way to describe ROKU stock over the past year would be “dead money.” The shares were worth more than $400 in July of last year. They then sank to $200 in early 2022, and then $85 prior to Roku’s latest earnings release.
Even $85 would have been a great time to abandon ship. Stunningly, the Roku share price slumped to $64 in after-hours trading on July 28. Clearly, the trading community had cast its vote against Roku that day.
In the company’s press release, Roku tried to put a positive spin on its Q2 results. For instance, Roku pointed out its total net revenue increased 18% year-over-year (YOY) to $764 million. However, that’s below the analyst consensus estimate of $804 million.
Turning to the bottom line, Roku reported a quarterly net earnings loss of 82 cents per diluted share. This is much worse than the net income of 52 cents per share posted in the year-earlier quarter. It’s also a miss compared to Wall Street’s expectation of a net loss of 71 cents per share.
Ad Spending Slows Down Significantly
On top of all that, Roku made a statement that undoubtedly scared some prospective investors away:
“In Q2, there was a significant slowdown in TV advertising spend due to the macro-economic environment, which pressured our platform revenue growth. Consumers began to moderate discretionary spend, and advertisers significantly curtailed spend in the ad scatter market (TV ads bought during the quarter).”
Will this situation improve for Roku soon? The company doesn’t seem to believe so, as it acknowledged, “We expect these challenges to continue in the near term as economic concerns pressure markets worldwide.”
With its challenges firmly in mind, Roku forecast its third-quarter 2022 total net revenue would increase roughly 3% YOY to $700 million. This was substantially below the analysts’ estimate of $898 million.
What You Can Do With ROKU Stock Now
Roku’s quarterly results only bolster the bearish argument against investing in the company. Indirectly, Roku seemed to admit the macroeconomic environment isn’t conducive to top- and bottom-line growth for the company.
Consequently, the outlook for Roku isn’t positive, even after an already challenging year. There’s no need to go bottom-fishing with ROKU stock now, and it’s fine to simply avoid the stock altogether.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.