Roku drops by 25% in after-hours trading due to Q2 earnings miss

Roku (NASDAQ: ROKU) sunk by 25% in after-hours trading on July 28, following a miss on their Q2 earnings report. A slowdown in TV advertising spending due to various macro headwinds spooked investors who fled the stock. 

The company posted $764.4 million in revenue, growing by 18.5% year-on-year (YoY), while analysts expected a 25% growth; thus missing estimates by $40.2 million. Further, the earnings per share (EPS) was -$0.82, missing estimates by $0.13. Other highlights included platform revenue rising by 26% YoY to $673 million and gross profit being up by 5% YoY. 

“Consumers began to moderate discretionary spend, and advertisers significantly curtailed spend in the ad scatter market (TV ads bought during the quarter). We expect these challenges to continue in the near term as economic concerns pressure markets worldwide,” the company said.

ROKU chart and analysis 

Both the short-term and long-term trends for ROKU are negative as the stock traded between $64.25 and $97.93 over the past month. The after-hours move has also pushed the stock far below all daily Simple Moving Averages (SMAs), on increased trading volume.  

At the moment, the resistance is at $69, while support is located at $60.58.  

Presently, analysts rate the shares as a moderate buy, seeing the average price in the next 12 months reaching $124.19, 45.81% higher than the current trading price of $85.17.

Some of the metrics Roku showed investors indicated that the company is still growing, for example, the firm added 1.8 million incremental active accounts, reaching a total number of 63.1 million. However, streaming hours fell by 0.2 billion compared to the last quarter, but still, Roku totaled 20.7 billion streaming hours. 

While investors digest the numbers the company showed, and get to grips with what the slowing ad spending will mean for the future of the company, market participants can expect more volatility for ROKU in the short term.

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