Should I buy Roku shares after the current sell-off?

Roku, Inc. (NASDAQ: ROKU) shares have weakened more than 20% after the company reported fourth-quarter results on Thursday.

Roku delivered another record year, and the company remains focused on being the best and largest streaming platform.

ARPU has increased to $41.03

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Roku, Inc. is an American publicly-traded company that manufactures a variety of digital media players for video streaming.

The company also provides digital and video advertising, content distribution, subscription, billing services, and licenses smart TVs under the Roku TV name.

Roku reported fourth-quarter results on Feb. 17, 2022; total revenue has increased by 33.1% Y/Y to $865.3 million, while the GAAP earnings per share were $0.17 (beats by $0.13).

The average revenue per user (ARPU) has increased to $41.03, which represents an increase of 43% YoY. Roku finished the quarter with 60.1 million active accounts, representing a net increase of 8.9 million active accounts compared with the fourth quarter of 2020.

Roku delivered another record year, and the company remains focused on being the best and largest streaming platform.

Despite this, fourth-quarter results and revenue outlook disappointed some investors, and shares of Roku nosedived more than 20% in one single day. The company’s management expects revenue of approximately $720 million for the next quarter, while the adjusted EBITDA should be around $55 million.

For full-year 2022, adjusted EBITDA should be roughly in line with 2020 levels on an absolute basis, while Steve Louden, CFO of Roku, said that estimate for full-year 2022 year-over-year revenue growth is in the mid-30s.

Pivotal Research lowered its rating to Sell from Hold, and assigned a $95 price target suggesting another 15% downside ahead.

MoffettNathanson has a similarly grim view, along with a Sell rating and $100 price target, Morgan Stanley cut its target to $115 from $190, and Guggenheim lowered its target to $135 from $210. MoffettNathanson reported:

Competition is hot against rivals with bigger checkbooks, deeper teams of engineers, and better content. Valuation may not find its bottom until it gets low enough for rumors of an accretive takeover to be considered possible.

Technical analysis

Roku shares have weakened more than 20% after the company reported fourth-quarter results, and the current price could be a good entry-level for traders.

If the price jumps above $130, the next target could be around $150, or even above. On the other side, if the price falls below $100 support, it would be a “sell” signal, and we have the open way to $90.

Summary

Roku shares have weakened more than 20% after the company reported fourth-quarter results on Thursday. Roku finished the quarter with 60.1 million active accounts, and the company remains focused on being the best and largest streaming platform.

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