Roku Stock Faces Off With Key Trendline

ROKU fell victim to September seasonality

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The last time we checked in with Roku, Inc. (NASDAQ: ROKU) the streaming stock was enjoying an upgrade. Since then, ROKU has turned in negative sessions in four of the last five trading days. Does this change anything regarding investors' prospects with the once red-hot stock?

The good news is that ROKU's pullback has been contained for now by its 320-day moving average, a trendline not breached on a closing basis since June 2020. And while the shares may be below their year-to-date breakeven level in 2021, they remain up 56% year-over-year. 

ROKU Chart

However, ROKU's valuation can be considered extremely high, with a price-earnings ratio of 175.91. In addition, Roku stock has a forward price-earnings ratio of 200.00, suggesting that the streaming company is expected to see a decrease in earnings in the short-term.

Nonetheless, Roku’s revenues are up more than 350% and its net income has increased by nearly $300 million since fiscal 2017. In general, the streaming brand has generated impressive top- and bottom-line growth. ROKU also has a fairly strong balance sheet with $2.08 billion in cash and $463.26 million in total debt, allowing them more freedom to explore other growth opportunities.

Now may be a great opportunity to weigh on the security's next move with options. ROKU's Schaeffer's Volatility Index (SVI) of 49% sits in the relatively low seventh percentile of its annual range, suggesting it sports attractively priced premiums. Plus, the stock's Schaeffer's Volatility Scorecard (SVS) sits at 100 (out of 100), suggesting the stock has usually exceeded option traders' volatility expectations in the past year.

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