Roku Stock Plunges 23% After Earnings Disappoint

Roku, the streaming TV pioneer, faced a dramatic 23% drop in its stock value on Friday, marking its steepest single-day decline since going public in 2017. The slump came on the heels of the company’s latest earnings report, which failed to meet analysts’ expectations.

After closing at $94.50 per share on Thursday, Roku’s stock plummeted to $72 by the end of Friday’s trading session. This decline was exacerbated by a post-earnings after-hours plunge on Thursday, triggered by Roku’s forecast of first-quarter total gross profit to be around $370 million, falling short of analysts’ $373.4 million projection, according to FactSet data.

The 23.8% drop on Friday surpassed Roku’s previous record decline of 23.1% in 2022. Despite this setback, Roku exceeded expectations in key areas, reporting 80 million active accounts, up from 70 million the previous year, and a 14% increase in revenue to $984.4 million for the fourth quarter of 2023.

In contrast to the previous year’s net loss of $237.1 million, Roku’s fourth-quarter net loss narrowed significantly to $78.3 million. Despite these positive metrics, the company issued a cautious outlook, citing challenges in the streaming market’s near-term landscape and an “uneven ad market recovery.”

Roku’s cautionary stance may be fueled by intensifying competition, particularly from tech giants like Amazon and Netflix, vying for a larger share of the advertising market. Adding to the pressure, there are reports that Walmart is in talks to acquire Vizio, a move that could further disrupt Roku’s position in the market.

During an earnings call on Thursday, Roku’s Chief Executive Anthony Wood declined to comment on the potential Walmart-Vizio deal, dismissing it as a rumor. However, the Wall Street Journal reported on Tuesday that Walmart is indeed in discussions to acquire Vizio for over $2 billion, a development that could potentially reshape the competitive landscape in the streaming TV industry.

Despite the challenges ahead, Roku remains a dominant player in the streaming TV market, with a strong user base and a track record of innovation. However, the company’s recent stock decline underscores the volatility and fierce competition in the streaming TV sector, signaling a challenging road ahead for Roku and its peers.