Roku Stock Plunges on Weak User Growth, Tight Margins

A mix of bull and bear notes rolled out after earnings

Deputy Editor
Aug 5, 2021 at 10:15 AM
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The shares of streaming name Roku Inc (NASDAQ:ROKU) are taking a step back, down 7.6% to trade at $388.33, following the company's second-quarter earnings report. Despite beating top- and bottom-line estimates, with earnings of 52 cents per share on revenue of $646 million, Roku reported weaker-than-expected user growth and tight hardware margins. According to the company, streaming hours decreased by 1 billion from the first quarter, while costs were increased by "tight component supply conditions and shipping constraints."

Analysts were quick to respond to the event, with a mixture of bull and bear notes rolling in. While Morgan Stanley and Wells Fargo slashed their price targets to $310 and $488, respectively, D.A. Davidson hiked its price target to $600 from $560. Meanwhile the 12-month consensus price target of $471.14 is a healthy 22.6% premium to current levels.

Roku stock's options pits are also popping with plenty of activity from both sides of the tape after earnings. In the first hour of trading, 38,000 calls and 18,000 puts have exchanged hands, which is four times the intraday average. The most popular by far is the weekly 8/6 400-strike call, followed by the 385-strike call from the same series, with new positions being opened at both. This means despite today's breather, options traders still expect to see plenty of upside for ROKU by the time these contracts expire tomorrow.

On the charts, today's negative price action has ROKU eyeing its first close below the $390 level since mid June. The security is also heading for its fifth daily loss in six sessions, and though the $380 mark saved today's pullback, Roku stock is still eyeing its first close below the 60-day moving average since June 16.


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