Roku Stock is Repricing and Resetting Itself

Streaming platform and hardware provider Roku NASDAQ: ROKU stock has tumbled (-58%) for the year and over (-70%) since hitting its all-time high of $490.76 on July 19, 2021. The leading U.S. streaming player has continued to ride the cord-cutting tailwinds. TV streaming devices surpassed legacy set-top and DVR boxes for the first time in the U.S., 65% to 63%, respectively. Roku is a key enabler and benefactor of this stat as it still continues to grow its distribution base. It’s The Roku Channel has become a top-five channel on the platform. While its growth rate has slipped from the year-ago period, its metrics are still strong. Supply chain disruption, inflationary pressures and geopolitical conflicts all contributed to pressure on gross margins and industry-wide TV unit sales. TV sales fell below 2019 pre-COVID levels for the third quarter in a row. This affects Roku as a significant part of its licensing fees are derived from Roku integrated TVs. The Company expects these headwinds to continue in the near-term but may be setting the bar low moving forward. Roku remains the leader in TV streaming and still grew revenues 39% in its fiscal Q1 2022 while adding 1.1 million new active accounts in the quarter to bring the total active account to 61.3 million users. Prudent investors that were waiting for a more reasonable valuation on shares of Roku can watch for opportunistic pullback levels to gain exposure.

Q1 Fiscal 2022 Earnings Release

On April 28, 2022, Roku reported its fiscal Q1 2022 results for the quarter ending March 2022. The Company reported an earnings-per-share (EPS) loss of (-$0.19) versus consensus analyst estimates for a loss of (-$0.21), a $0.02 beat. Revenues grew 27.8% YoY to $733.7 million, beating analyst estimates for $718.56 million. The platform revenues increased 39% YoY to $646.9 million. Player revenues fell (-19%) YoY to $86.8 million. Active accounts grew to 61.3 million, up 7.7 million YoY.  Average revenue per user (ARPU) rose 34% YoY to $42.91.   

Downside Guidance

The Company lowered its guidance for Q2 2022 revenues to come in around $805 million versus $823.13 consensus estimates. Fiscal full-year 2022 revenues are expected to rise 35% YoY to $3.73 billion versus $3.72 billion consensus analyst estimates.

Conference Call Takeaways

Roku Co-Founder and CEO Anthony Wood noted that Q1 2022 sales grew 39% YoY driven by higher advertising revenue and content distribution. He commented, “From day one, the Roku platform has been built to operate at the center of TV streaming, meeting the needs of each participant in the ecosystem. For consumers, we provide an excellent experience with trusted discovery tools that allow them to find and watch content the way they prefer, whether that's via ad-supported or subscription services.” He noted that content owners benefit from its platform by helping to build and retain viewers while monetizing content. Ad-supported streaming are the key component of the streaming ecosystem. This is underscored by the success of The Roku Channel, which has grown to be a top five app on its platform in the U.S. for the third consecutive quarter. It also because a top five app for streaming engagement in the U.S. The Company will launch new ad product offerings and content to advertisers and will continue to invest to remain the leader in TV streaming.

ROKU Opportunistic Pullback Levels

Using the rifle charts on the weekly and daily time frames provide a precision view of the landscape for ROKU stock. The weekly rifle peaked near the $117.39 Fibonacci (fib) level before plunging on the failed weekly stochastic low band coil attempt. The weekly 5-period moving average (MA) resistance is slowing its descent at $99.20 followed by the weekly 15-period MA at $119 as the weekly stochastic attempts another cross up at the 10-band. The higher cross up this time sets up a potential weekly divergence bottom if it can bounce through market structure low (MSL) buy trigger level on a breakout through $110.56. The weekly 200-period MA is flat at $177.69. The weekly upper Bollinger Band (BB) sits at $251.85. The daily rifle chart downtrend is stalled as the daily 5-period MA flattens at $87.14 followed by the flattening 15-period MA at $94.30. The daily lower BBs sit at $71.71 with upper daily BBs at $122.68. The daily stochastic is attempting to coil off the 20-band. Prudent investors can watch for opportunistic pullback levels at the $86.39, $83.54 fib, $77.15 fib, $71.71 fib, $67.22, $61.12, $58.22 fib, $53.90, and the $46.39 fib level. Upside trajectories range from the $117.39 fib level up towards the $163.06 fib level.