Roku (NASDAQ: ROKU), the leading streaming distribution platform, has been having another tough week. A broader sell-off in tech stocks and a downbeat update from Comcast‘s Peacock and streaming service Alphabet‘s YouTube tamped down hopes for a comeback from Roku.
As of Thursday’s close, Roku stock was down 8%, according to data from S&P Global Market Intelligence.
Image source: Getty Images.
Roku stock has been eating dirt since the pandemic’s height. It ramped up spending at the wrong time and is still trying to rebalance its cost structure and show investors it can be sustainably profitable.
At the same time, pessimism about the broader streaming market has spread across the stock market as streaming companies, which Roku relies on for ad spending, cut back on their own spending.
Those fears grew worse on Wednesday after Alphabet reported 13% revenue growth at YouTube in the second quarter, below expectations of 16%. YouTube is the biggest digital video advertising platform in the world, and the underwhelming results could show weakening demand among advertisers.
At the same time, a report from Comcast showed that its Peacock streaming service is losing subscribers, with total subs down from 33.5 million at the end of the first quarter to 33 million at the end of Q2 as it focused on narrowing losses at the streaming service. Those results were also seen as negative for Roku.
Roku will issue its own Q2 earnings report on Aug. 1 after the market closes, and the company will need to show meaningful progress toward profitability. The streaming platform has returned to solid revenue growth and usage is growing, but the big question is whether it can make that growth count on the bottom line.
Analysts see revenue increasing 21.2% to $937.6 million, and its adjusted loss per share narrowing from $0.76 to $0.43. Investor expectations seem to have soured after the updates from Alphabet and Comcast.
Whatever happens next week in the earnings report, the stock is likely to swing big one way or the other.
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Jeremy Bowman has positions in Roku. The Motley Fool has positions in and recommends Roku. The Motley Fool has a disclosure policy.
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