Stock Bubbleheads Clobbered By 80 Percent Roku Crash: 5 Things To Know

Stock Bubbleheads Clobbered By 80 Percent Roku Crash: 5 Things To Know


Roku logo on a remote control, Aug. 13, 2020. (AP Photo/Jenny Kane, File)

Shares in Roku Inc., a TV streaming platform operator that sells hardware products to help customers stream to their favorite devices, tumbled after the company reported its fourth-quarter revenue had missed expectations. The company gave an even gloomier outlook for 2022 as covid-19 restrictions ease and subscribers decline.

Silicon Valley-based Roku, which had more than 60 million active accounts in 2021, got a boost during the pandemic as demand surged from people stuck at home. Its fortunes dwindled in recent months as covid-19 restrictions all but disappeared and the economy roared back.

Roku shares shed as much as 22.29 percent on Feb. 18 to trade $112.46, a day after posting disappointing financial results — the largest drop since Nov. 8, 2018. This is an 80-percent decline from highs of around $479 in July 27, 2021. Roku shares have since rebounded somewhat to trade at $121.97 as of this writing.

The company has been losing money for years and held a $40 billion valuation that analysts said was a departure from its fundamentals.


Here are five things to know about Roku’s share price drop:

1. Supply chain disruptions hurt the company’s revenue in Q4

Roku said that global supply chain disruptions are having an impact on the sales of its Roku TV, which is contributing to a slowdown in active account growth.

Issues caused by constraints in the global supply chain such as chip shortages and rising freight costs have affected the production of TVs and other electronics, raising prices of end products such as Roku’s streaming device.

2. Roku is one of the largest streaming device companies in the U.S.

Roku currently has a massive share in the U.S. for streaming devices, with up to 37 percent of the market. Hardware accounts for 17 percent of Roku’s revenue while 83 percent comes from advertising. It is currently the leading CTV (connected TV) company in the U.S..

3. Roku U.S. active accounts are more than cable

Roku’s U.S. active user base is now greater than video subscribers of all cable companies combined. It added 8.9 million total accounts in 2021 and said its 60 million active U.S. accounts have now surpassed the video subscribers of all U.S. cable companies. The connected TV platform added 3.7 million active accounts in the fourth quarter of 2021, up from the 1.3 million it added in the previous quarter.

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4. Delayed advertising spend seen affecting 2022

Delayed advertising spend in verticals affected by supply chain issues will continue into 2022, affecting how it monetizes content, Roku said. Sales of TVs are likely to remain below pre-pandemic levels, affecting the rate at which Roku acquires active customers, according to the company.

5. Roku is planning to build its own smart TVs

Roku is planning to begin its own smart TV following in the footsteps of other streaming giants such as Amazon Fire TV, according to Business Insider. The company reportedly convened a focus group earlier in February to kick the tires on its own smart TV brand.