Netflix Debacle Takes Another Victim in Roku Stock

Stock Market

The shocking downturn of Netflix (NASDAQ:NFLX) this week is pulling other streaming stocks down in its wake. Now you can count Roku (NASDAQ:ROKU) stock among one of the victims. Roku is down another 5% today, continuing a slide that began when Netflix reported its first drop in total subscribers in a decade on Tuesday night. Since Netflix’s earnings call, Roku is down nearly 12% overall, adding more kindling to the brush fire that is a 54% loss so far in 2022.

Benchmark analyst Daniel Kurnos dropped his firm’s price target on Roku stock from $305 to $240 today, although he maintains a “buy” rating on the share. Kurnos cited what he called the Netflix “debacle” and said that Roku may underperform analysts’ expectations for the next two quarters. But, he said, Roku is what he calls a neutral player in the streaming space, as it provides platforms for Netflix, Disney (NYSE:DIS), Apple’s (NASDAQ:AAPL) Apple TV and other streaming services to reach customers who don’t have smart TVs.

That bodes well for Roku in the long-term. According to eMarketer, 35.5 million U.S. households, or around 27%, canceled paid TV subscriptions by the end of 2021. And that figure is expected to climb to 46.6 million households, or more than 35% of the space, by 2024. On top of that, Pew Research says more than 70% of all age groups polled who do not pay for a traditional TV service say it’s because it’s not necessary. All the content they want to watch can be accessed online.

Roku says that it ended 2021 with 60.1 million active accounts, which was up 17% from a year ago. When the company reports earnings again on Apr. 28, investors should check to see if Roku sees the same kind of drop in accounts as Netflix reported this week.

Roku has guided for revenue of $720 million, which is below analysts’ expectations of $748.5 million. Earnings for the fourth quarter of 2021 included revenue of $865.3 million and net income of $23.7 million, or 17 cents per share. Analysts had expected revenue of $894 million and earnings of 7 cents per share.

Also notably, the Ark Innovation ETF (NYSEARCA:ARKK) purchased another 335,947 shares of ROKU stock on Wednesday. Cathie Wood’s ARK Invest has been one of the biggest bulls of Roku and other downtrodden growth and tech stocks. ARK Invest now holds 5.7% of Roku stock, with a position of roughly $14.83 billion.

On the date of publication, Patrick Sanders did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Patrick Sanders is a freelance writer and editor in Maryland, and from 2015 to 2019 was head of the investment advice section at U.S. News & World Report. Follow him on Twitter at @1patricksanders.

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