Summary:

  • Roku (ROKU) fell 16% on Thursday, after the company posted results that beat Wall Street expectations.
  • Based on its market cycles, we believe the stock the may fall even further in the coming months.

The company reported earnings per share of -$0.22 and total revenue of $261 million, compared to analyst estimates of -$0.28 and $256 million. Even with competition increasing, Roku managed to grow subscribers 1.7 million but may have spent amply to achieve that result.

CEO Anthony Wood said, “Our goal is to drive scale and reach of the platform, and we will do so by offering consumers exceptional devices and appealing prices rather than optimizing for hardware gross profit.”

Our approach to stock analysis uses market cycles to project price action. Our view is that ROKU is in the declining phase of its current cycle. Within the next two months, it is likely that the stock will approach $100 again before bottoming.

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