Roku Is Up By 6%, Here Is Why

Key Insights

  • Apple Music becomes available on the Roku Platform. 
  • Meanwhile, analyst estimates keep moving lower, which is bearish for Roku stock. 
  • The stock will need additional positive catalysts to break the current downside trend. 

Roku Stock Rallies After Apple Music Appears On The Roku Platform

Shares of Roku gained strong upside momentum after the company announced that Apple Music app would be available globally on the Roku platform.

Roku stock has been under strong pressure this year as the company’s internal problems and the general sell-off in high-PE triggered a huge pullback.

The company has recently released its first-quarter report, reporting revenue of $734 million and a GAAP loss of $0.19 per share. In the report, Roku highlighted ongoing supply chain issues. While the results were not impressive, the stock managed to stabilize and is trying to develop additional upside momentum.

What’s Next For Roku Stock?

Analysts expect that Roku will report a loss of $1.3 per share in the current year and a loss of $0.23 per share in the next year, so the company is not expected to be profitable in anytime soon.

It should be noted that analyst estimates have been moving lower in recent months. Just a few weeks ago, analysts expected that Roku would be able to report a profit in 2023, but the outlook has changed.

It remains to be seen whether recent news will be able to change the market sentiment towards Roku stock. S&P 500 is trading at yearly lows, and traders continue to move out of riskier assets, which is bearish for Roku stock and other growth stocks. In addition, earnings estimates keep moving lower. At this point, it looks that Roku stock will need more positive catalysts to break the current downside trend.

For a look at all of today’s economic events, check out our economic calendar.

Netflix Is Down By 39%, Here Is Why

Key Insights

  • Netflix stock dives after the company reports that net subscribers decreased by 200,000 in Q1 2022. 
  • The company’s subscriber forecast for Q2 2022 shocks the market. 
  • Netflix’ growth story is busted, and the company needs to come up with positive catalysts to break the current downside trend. 

Netflix Stock Collapses As The Company Predicts A Loss Of 2 Million Subscribers In Q2 2022

Shares of Netflix found themselves under strong pressure after the company released its first-quarter report. Netflix reported revenue of $7.87 billion and earnings of $3.53 per share, beating analyst estimates on earnings and missing them on revenue.

The market focused on the company’s subscriber data as Netflix said that it lost 200,000 subscribers in Q1 2022. More, the company believes that net subscribers will decrease by as much as 2 million in the second quarter of 2022.

The market is clearly shocked by this news, and Netflix stock is down by 39% during the current trading session. Other stocks in this market segment, like Disney  and Paramount, are also moving lower.

What’s Next For Netflix Stock?

Netflix has been a classic growth stock for years, so investors were focused on the company’s subscriber numbers and potential revenue opportunities rather than the company’s valuation.

Currently, analysts expect that Netflix will report earnings of $10.96 per share in 2022 and earnings of $14.17 per share in 2023, so the stock is trading at 15 forward P/E.

Such valuation levels look cheap for one of the leading tech stocks, but earnings estimates have been moving lower in recent months and they will decline after the earnings report.

Recent market action shows that tech stocks get severely punished if the market has doubts about their ability to grow. Examples include Roku (from $490 to $98), Zoom (from $588 to $95), Peloton  (from $171 to $20).

In this light, it remains to be seen whether speculative traders will rush to buy Netflix shares after the huge pullback which took the stock from the $700 level to the $215 level.

Netflix promised to monetize shared passwords and explore a move into advertising, but the company will have to come up with tangible evidence of the success of such initiatives before the market is ready to view it as a growth stock again.

For a look at all of today’s economic events, check out our economic calendar.

Why Roku Stock Is Down By 28% Today

Roku Stock Dives After Earnings Report

Shares of Roku gained strong downside momentum after the company released its fourth-quarter results. Roku reported revenue of $865.3 million and GAAP earnings of $0.17 per share, missing analyst estimates on revenue and beating them on earnings.

The company reported that Active Accounts reached 60.1 million, up by 8.9 million from Q4 2020. Average Revenue Per User (ARPU) grew by 43% on a year-over-year basis.

In Q4 2021, player unit sales declined by 4% on a year-over-year basis, serving as a significant bearish catalyst for Roku stock. In addition, the company’s guidance disappointed analysts. In Q1 2022, Roku expects to report revenue of $720 million and adjusted EBITDA of $55 million.

The company also noted that ongoing supply chain disruptions would continue to impact the economy and that overall TV unit sales would likely remain below pre-pandemic levels, which could have an impact on the active account growth.

What’s Next For Roku Stock?

Analysts expect that Roku will report earnings of $1.63 per share in 2022, so the stock is trading at more than 60 forward P/E for this year despite the massive pullback.

In the current market environment, traders are very sensitive to any negative news from growth companies. In Roku’s case, there’s too much bad news in one report. Player unit sales declined on a year-over-year basis, revenue missed estimates while Q1 2022 guidance was below analyst expectations. A combination of these negative factors led to massive pressure on Roku stock.

It should be noted that Roku stock has already lost almost 80% of its value from the highs that were reached back in mid-2021. However, the company is still not cheap at a time when the market is ready to punish high-PE stocks for any shortcomings.

In case the broad market pullback continues, Roku stock may gain additional downside momentum and settle below the psychologically important $100 level. Traders should also watch the dynamics of ARK Innovation ETF, which has recently moved to new lows. A panic sell-off in ARKK will signal that its holdings like Roku have more room to fall.

For a look at all of today’s economic events, check out our economic calendar.

Uncertainty Controls Wall Street

Investors are still unsure what to make of the situation in Ukraine. The U.S. and NATO say Russia is continuing to build its military forces near Ukraine while Russia says it has sent some troops home.

Russian military exercises with Belarus are scheduled to end on February 20. The closing Ceremony for the Winter Olympics in China also happens to be the same day.

If there isn’t some noticeable decrease in Russia’s forces at that time, military experts think the West will amplify the pressures they are trying to put on Russia but who knows?

FOMC “minutes”

Turning to the Federal Reserve, the release yesterday of “minutes” from the January policy meeting confirmed what most on Wall Street already suspected – the Fed is ready to move more aggressively in the upcoming tightening cycle than what’s been done in the past. The minutes said “most” members suggested a faster pace of interest rate increases than in the tightening cycle that began in 2015. Between 2015 and 2018, the Fed lifted rates by 25 basis points a total of nine times, and never more than once in a quarter.

Most members indicated they are comfortable raising rates at consecutive policy meetings, meaning there could be multiple hikes per quarter.

Members also indicated that reductions to the Fed’s balance sheet will likely begin this year by allowing maturing bonds to roll off, though some officials did say outright selling of mortgages may be necessary.

During the 2015 tightening cycle, the Fed didn’t begin reducing its holdings until 2017. Again, Wall Street has already been expecting the Fed to act much quicker this time around so the meeting “minutes” didn’t really provide any new insights. The details as to how high and how fast rates will be raised, and when and by how the balance sheet will be reduced won’t be answered until the Fed’s next policy meeting on March 15-16.

Investor expectations for the Fed’s next moves are already extremely hawkish with the CME’s FedWatch Tool showing traders think there’s a 50% chance that the central bank hikes rates by 50 basis points next month. That’s down from earlier this month but keep in mind, it was considered a nearly 0% probability at the start of 2022.

Bulls want to believe that “Fed Fear” is mostly priced in now and that stocks prices should remain flat-to-slightly higher until the central bank reveals more details. However, there are still two key reports coming up that could significantly impact sentiment – the February Employment Report on March 4 and February Consumer Price Index on March 10. If job growth and inflation surprise to the upside, it will again stoke fears about a more aggressive Fed. The underlying fear is that the faster the Fed moves, the higher the likelihood of a policy misstep.

Data to watch

Today, investors will be digesting January Housing Starts and the Philadelphia Fed Index. Earnings of note today include Airbus, Nestle, Nice, Orange, Palantir, Roku, The Southern Company, and Walmart.

U.S. and Russian Aircraft Flew Perilously Close to Each Other Amid Ukraine Tensions The Wall Street Journal Reported… U.S. and Russian aircraft operating in the Mediterranean Sea flew dangerously close to each other in three separate incidents over the weekend, including one in which the two nations’ aircraft came within 5 feet of each other, defense officials said.

The incidents, which occurred in international airspace Friday and Saturday, involved three Russian Su-35 jet fighters crossing into the flight path of three U.S. P-8A surveillance aircraft, the officials said, and come amid heightened tensions between the U.S. and Russia over Ukraine. At the same time there are some sources reporting that Russia is bringing even more troops to the Ukraine border while others are reporting a possible retreat… so the drama continues with no one really having a clear answer.

Wall Street Week Ahead Earnings: Shopify, Baidu, Walmart, Deere and DraftKings in Focus

Investors will focus on December quarter earnings for stocks that are economically sensitive, which should show better profits than technology stocks. Increasing Treasury yields and risk aversion could hit the stock market hard over the coming months. In addition, investors will closely monitor the latest news on the rapidly spread Omicron coronavirus variant to see how it impacts earnings in 2022.

Earnings Calendar For The Week Of February 14

Monday (February 14)

TICKER COMPANY EPS FORECAST
AAP Advance Auto Parts $1.93
ALX Alexander’s $4.29
AMKR Amkor Technology $0.65
ANET Arista Networks $0.6
SRC Spirit Realty Capital $0.81
VNO Vornado Realty Trust $0.76
WEBR Weber $-0.02

Tuesday (February 15)

TICKER COMPANY EPS FORECAST
ABNB Airbnb $0.05
AKAM Akamai Technologies $1.14
DVN Devon Energy $1.24
MAR Marriott International $1.04
RPRX Royalty Pharma $0.79
VIAC ViacomCBS $0.37
WFG West Fraser Timber $3.51

 

Wednesday (February 16)

IN THE SPOTLIGHT: SHOPIFY, BAIDU

SHOPIFY: Canadian multinational e-commerce company is expected to report its fourth-quarter earnings of $0.62 per share, which represents a year-over-year decline of over 46% from $1.15 per share seen in the same period a year ago. But the e-commerce software company would post revenue growth of over 37% to $1.34 billion.

According to Barron’s report, Gary Robinson, investment manager at Baillie Gifford said that Shopify is miles ahead of its competitors in helping merchants all over the world sell their items. He added that the company’s revenue could rise sharply in the next five years.

BAIDU: The Chinese tech giant is expected to report its fourth-quarter earnings of $1.89 per share, which represents a year-over-year decline of nearly 40% from $3.08 per share seen in the same period a year ago.

However, Baidu Inc, a leader in the Chinese search industry in terms of user market share, would post revenue growth of about 9% to $5.04 billion. The company has beaten consensus earnings estimates in most of the quarters in the last two years, at least.

“We maintain a “Buy” rating for Baidu (BIDU) with a target price of RMB 165. Our target price is based on the forward P/E of 18.48x and forward P/S of 0.42x for FY22. Non-GAAP EPS of RMB 56.59 ($8.98) for FY22. This provides an upside potential of 15% over the CMP of RMB 143.80,” noted Shejal Ajmera is founder and head of research at CrispIdea.

“We decrease our estimate for revenue growth to 14.3% from 19% for FY21 due to China’s low GDP growth. We estimate revenue growth of 10% for FY22 and 12% for FY23. We estimate EPS of RMB 56.19 ($8.87) and RMB 56.59 ($8.93) for FY21 and FY22, respectively.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 16

TICKER COMPANY EPS FORECAST
AMAT Applied Materials $1.85
SAM Boston Beer $2.87
H Hyatt Hotels $-0.08
MGY Magnolia Oil & Gas $0.77
MRO Marathon Oil $0.52
NVDA Nvidia $1.0
TRIP TripAdvisor $-0.04

 

Thursday (February 17)

IN THE SPOTLIGHT: WALMART

Bentonville, Arkansas-based retailer Walmart is expected to report its fourth-quarter earnings of $1.49 per share, which represents year-over-year growth of over 7% from $1.39 per share seen in the same period a year ago.

The multinational retail corporation that operates a chain of hypermarkets would post revenue growth of nearly 1% to $150.91 billion. The company has beaten consensus earnings estimates in most of the quarters in the last two years, at least.

“Latest AlphaWise data shows Walmart+ membership continues to increase, with ~15m members total (~12% household penetration) & ~1m net members added in the past quarter. Overlap between Walmart+ & Prime remains high; we’ll monitor if this changes with a Prime fee hike coming,” noted Simeon Gutman, equity analyst at Morgan Stanley.

“We expect Walmart (WMT) to sustain recent momentum in its core business in F’22/F’23 and see a growing ability to balance longer-term investments with near-term returns. Our OW rating and $170 PT are underpinned by a preference for 1) quality players with scale and 2) defensive retailers as the market undergoes a mid-cycle transition.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 17

TICKER COMPANY EPS FORECAST
AN AutoNation $4.96
DBX Dropbox $0.2
ROKU Roku $0.01

 

Friday (February 18)

IN THE SPOTLIGHT: DEERE, DRAFTKINGS

DEERE: The world’s largest maker of farm equipment, is expected to report its fiscal first-quarter earnings of $2.28 per share, which represents a year-over-year decline of over 41% from $3.87 per share seen in the same period a year ago. The agricultural, construction and forestry equipment manufacturer would post revenue growth of about 0.5% to $8.09 billion.

“Higher input and freight costs to affect FY22 margins. We downgrade our rating to “Hold” from “Buy” for Deere & Co. and upgrade our TP to $406 for FY23. We derive TP based on non-GAAP EPS to $22.30 & $25.14 for FY22 & FY23, respectively and P/E of ~16.1x for FY23. This provides an upside potential of 8.6% from CMP of $373.79,” noted Shejal Ajmera, Head of Research at Crispidea.

“Following are the reasons for the above assumptions: 1) Strong demand in farm and construction equipment to aid topline; 2) Focus on automation to ensure long term growth and 3) Short term headwinds to affect profitability.”

DRAFTKINGS: The U.S.-focused gambling operator is expected to report its fourth-quarter loss of $0.78 per share, a dime greater than the loss of $0.68 it recorded in the same period a year ago. But the revenue would grow more than 36% to $439.5 million.

“We forecast legal US sports betting & iGaming to increase from <$1.5B in 2019 to $20.6B in 2025 as more states legalize and spend per capita rises. Forecast DKNG to maintain top tier share, 24% in OSB and 21% in iGaming in 2025. Investors question LT profits, but other developed markets have shown 25-30%+ profits for operators at maturity, esp. those with a customer acq. advantage similar to DKNG’s with its DFS database,” noted Thomas Allen, equity analyst at Morgan Stanley.

“Current valuation of 9x 2025e EBITDA does not reflect long-term margins or growth. Upside drivers include signs of profits in mature states, new product innovation and higher market share. Downside risks include higher losses, greater competition and lagging product innovation.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 18

TICKER COMPANY EPS FORECAST
ABR Arbor Realty Trust $0.39
B Barnes Group $0.49
BLMN Bloomin’ Brands $0.52
DE Deere & Co. $2.28

 

Why Roku Stock Is Up By 6% Today

Roku Stock Gains Ground After Company Announces New Animation Series

Shares of Roku gained strong upside momentum after the company announced its first adult animated scripted series.

The stock also enjoyed a boost as traders rushed to buy shares of tech companies after the recent sell-off.

Some bottom-picking is clearly in play here as Roku stock declined from the $490 level in July 2021 to the recent bottom near the $160 level.

ARK Innovation ETF, which holds a significant position in Roku, is also enjoying a rebound today as traders look ready to buy beaten tech stocks after a long pullback.

What’s Next For Roku Stock?

It looks that the announcement about the new animated series was not the main catalyst for Roku stock today.

Roku shares were oversold, and traders were ready to buy them when the general market sentiment towards tech stocks improved.

While a 6% move looks good, it’s just a blip on the chart as Roku stock is down by roughly 65% from its highs.

Analysts expect that Roku will report earnings of $1.65 per share in 2022, so the stock is trading at more than 100 forward P/E despite the huge pullback.

In this light, Roku’s near-term fate will depend on whether the market will be ready to support high-PE stocks. Analysts do not expect a significant increase in Roku’s earnings from 2021 to 2022 (estimated EPS for 2021 is $1.58), and it remains to be seen whether current valuation is justified by modest growth levels.

Of course, the market is always ready to look beyond the next year when it looks at a tech stock, but the continued increase in Treasury yields and the upcoming Fed moves on rates may force market players to be more conservative, which will be bearish for Roku.

For a look at all of today’s economic events, check out our economic calendar.

Best Oversold Stocks to Buy for January 2022

At my research firm, MAPsignals, we track the Big Money looking for trends. We believe Big Money analysis can alert you to market and sector trends. Here’s what daily buys and sells looks like over the last six months. It’s been choppy:

Chart, histogram

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That’s what a rotational market looks like. See the red bars? Those are stocks we believe are getting sold. When red bars run rampant, good names can get crushed. They can become what I call “oversold.”

And that can mean opportunity. Let’s look at five stocks seeing lots of red that appear to be near-term oversold: ROKU, BABA, RH, ZM & ETSY.

Up first is Roku, Inc. (ROKU), the television streaming platform.

Even though great companies’ stocks can be volatile, like ROKU over the past year, they’re worthy of attention, especially on pullbacks. Check out ROKU:

  • 1-month performance (-24.2%)
  • Recent Big Money sell signals

To show you what our Big Money signals looks like on a stock, have a look at all the buys (green bars) and sells (red bars) in ROKU over the past year:

Chart, histogram

Description automatically generated

Clearly, that’s a lot of red since September.

Looking more broadly, Roku has been a high-quality stock for years. The blue bars in the chart below show when ROKU was likely being bought by a Big Money player and also a high-ranking stock, according to MAPsignals.

When you see a lot of blue, like ROKU did in 2019 (when it hovered around half of its current price), it can be very bullish:

Source: www.MAPsignals.com

Those blue signals indicate Big Buying and strong fundamentals. As you can see, Roku’s recent numbers have been strong, making it worth of attention at these levels:

  • 1-year EBITDA growth rate (+18.9%)
  • 1-year sales growth rate (+57.5%)

Next up is Alibaba Group Holding Ltd. (BABA), which is a Chinese technology giant – it’s like China’s Amazon.

Check out these technicals for BABA:

  • 1-month performance (7.5%)
  • Recent Big Money signals

It’s been getting hammered for more than a year:

Chart, histogram

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But now let’s look long-term. These are the top buy signals Alibaba has made since 2016. The Big Money has been all over it for a while:

Source: www.MAPsignals.com

Let’s look under the hood. As you can see, Alibaba has had rock-solid, double-digit growth in earnings and revenue:

  • 1-year EBITDA growth rate = (+17.4%)
  • 1-year sales growth rate = (+44.6%)

Another growth name is Restoration Hardware (RH), which is a luxury home furnishings retailer.

Strong candidates for growth usually have Big Money buying the shares. RH has historically had that. But recently, it’s full of red which could be an opportunity:

  • 1 month performance (-19.6%)
  • Historical Big Money signals

Chart, histogram

Description automatically generated

Below are the blue Big Money signals RH has made since 2015. That’s the JUICE!

Source: www.MAPsignals.com

Now let’s dig deeper. RH’s growth in earnings is impressive, as is its sales growth. I expect more of the same in the coming years:

  • 1-year EBITDA growth rate = (+10.7%)
  • 1-year sales growth rate = (+7.6%)

Number four on the list is Zoom Video Communications, Inc. (ZM), which is a video conferencing platform and popular “stay-at-home” stock.

Here are the technicals important to me:

  • 1 month performance (-12.2%)
  • Historical Big Money signals

Recently, it’s been a choppy downward slide, with more Big Money selling than buying:

Chart, histogram

Description automatically generated

But not long ago, Zoom was a Big Money darling. Below are the Big Money buy signals for ZM since it’s 2019 trading debut:

Source: www.MAPsignals.com

Let’s look under the hood. Despite its price slide, Zoom has been growing earnings nicely and generated huge sales growth:

  • 1-year EBITDA growth rate = (+6.4%)
  • 1-year sales growth rate = (+325.8%)

Our last growth candidate is Etsy, Inc. (ETSY), which is an online marketplace and commerce platform. A strong final quarter in 2021 of Big Money buying has given way to steep declines:

Chart, histogram

Description automatically generated

Check out these technicals:

  • 1-month performance (-24.1%)
  • Historical Big Money signals

Etsy is a high-quality stock since it’s made my Top 20 report. As you can see below, it’s been a Big Money favorite since 2016. Right now, it’s on a pullback and could be an opportunity.

Source: www.MAPsignals.com

Now let’s look below the surface a bit. Earnings have been growing quite well, and there’s been enormous sales growth:

  • 1-year EBITDA growth rate = (+16.2%)
  • 1-year sales growth rate = (+110.9%)

The Bottom Line

ROKU, BABA, RH, ZM & ETSY represent the top oversold stocks for January 2022. They’ve been sold a lot lately…perhaps too much. Strong, fundamentally-sound stocks seeing near-term sell signals are worthy of extra attention because of their long-term potential.

To learn more about MAPsignals’ Big Money process please visit: www.mapsignals.com

Disclosure: the author holds long positions in ROKU, BABA, ZM & ETSY in managed accounts.

Investment Research Disclaimer

https://mapsignals.com/contact/

 

Why ARK Innovation ETF Is Down By 5% Today

ARK Innovation ETF Drops Amid Sell-Off In Growth Stocks

ARK Innovation ETF found itself under strong pressure today as traders rushed out of riskier assets on fears that Fed will raise rates aggressively in 2022.

The market begins to price in as much as 4 rate hikes this year. Treasury yields are rising fast, and S&P 500 has already pulled back by about 5% from highs that were reached at the beginning of this year.

Stocks with high price-to-earnings ratios are losing ground fast, and ARK Innovation ETF’s holdings are concentrated in such stocks. The biggest ARKK holding, Tesla, is trading at more than 110 forward P/E. Roku is valued at more than 100 forward P/E while Teladoc is not profitable.

Other big holdings like Block, Zoom, Shopify and Spotify are also richly valued, and there is a lot of potential for multiple compression.

What’s Next For ARK Innovation ETF?

ARKK has found itself in a challenging position as the stocks in the fund’s portfolio are all under pressure. There is no real diversification as they all belong to the same market segment, which is currently moving lower.

Traders should focus on the fate of Tesla, which is the bright spot in ARKK portfolio. In case Tesla begins to fall at a faster pace compared to its normal volatility, a true panic may emerge in ARKK.

It should be noted that ARKK biggest holdings remain very expensive by traditional metrics even after the huge pullback. Thus, if the market stays focused on valuation concerns due to rising rates, these holdings will have plenty of room for additional downside.

Tesla is holding reasonably well because Tesla’s growth story is very strong, but other stocks do not have such powerful stories which can offset current market concerns.

To have upside, ARKK needs a change of market sentiment, which will likely depend on Fed’s comments and the trajectory of Treasury yields. If current trends persist or Fed becomes even more hawkish, ARKK will remain under material pressure.

For a look at all of today’s economic events, check out our economic calendar.

Why Roku Stock Is Down By 7% Today

Roku Stock Falls As General Manager Of Platform Businesses Announces His Departure

Shares of Roku gained downside momentum and moved to multi-month lows after the company announced that Scott Rosenberg, who served as Senior Vice President and General Manager of Platform Business, would step down in the spring of 2022. Rosenberg joined Roku back in 2012.

Such news are often viewed as a material downside catalyst when the stock is already in a downside trend. In Roku’s case, the shares have moved from the $474 level in July 2021 to the $180 level as traders questioned whether the company’s valuation was justified.

Back in December 2021, the stock made an attempt to gain upside momentum after the company reached a deal with Google to keep YouTube and YouTube TV apps on Roku, but this positive development failed to serve as a longer-term upside catalyst for company’s shares.

What’s Next For Roku Stock?

While Roku stock declined by more than 60% from the highs that were reached back in July, valuation remains a concern. Analysts expect that Roku will report earnings of $1.67 per share in 2022, so the stock is trading at roughly 108 forward P/E despite the huge pullback.

The Fed is about to raise rates while Treasury yields are already moving higher, which is a challenging environment for high-PE stocks. Not surprisingly, tech leaders have been under material pressure in recent trading sessions.

There is another thing to consider when looking at Roku stock. Roku is the second-largest holding of Cathie Wood’s ARK Innovation ETF, which has been moving lower at a fast pace in recent months.

Back in 2020 – early 2021, the sole fact that ARKK owned a share in the company used to serve as an upside catalyst. In early 2022, the reverse may be true, especially in case the fund’s main investment, Tesla, has any problems.

At this point, Roku remains a risky investment as the company remains richly valued in an environment where traders start to pay attention to valuation.

For a look at all of today’s economic events, check out our economic calendar.

Best Stocks to Watch in 2022

International Business Machines Corp. (IBM) has been losing ground for nearly eight years, plagued by poor management and aggressive competition. The old school tech behemoth took a giant leap forward in November, splitting off slower performing divisions into Kyndryl Holdings Corp. (KD). That stock has dropped like a rock since coming public, as it should, while the slimmed-down IBM has gained a modest 2%. Those gains should accelerate in 2022, with a rally above 155 signaling the first uptrend since 2013.

Visa Inc. (V) transactions surge when folks travel and spend their hard-earned dollars, euros, and shekels on airlines, hotels, and expensive meals. The Delta and Omicron variants have kept most of us closer to home in 2021, making the fintech’s quarterly earnings far less reliable. The stock whipped back and forth as a result, yielding this year’s nearly flat annual return.  Look for much stronger 2022 stock performance as massive immunity and a wave of new COVID drugs herald a return to normal around the world.

Boeing Co. (BA) rallied in 2020 when the U.S. government allowed the troubled 737 MAX jetliner to return to the friendly skies. However, supply chain disruptions and the pandemic weighed on the stock throughout 2021, yielding a zero return just like Visa.  2022 should generate much stronger gains for long-suffering shareholders, especially with the stock now sitting on 9-month support at 200. Better yet, it could double in price in the next two or three years, returning to lofty 2019 levels.

Roku Inc. (ROKU) is the most controversial entry on this 2022 watch list after a horrible year, in which the streaming provider has fallen a gut-wrenching 32%. Worse yet, the stock price has been cut in half since posting an all-time high less than five months ago. However, Roku could pick up the pieces in the fragmented streaming space, giving confused cord-cutters a single piece of hardware to collate dozens of free and paid services.

Cryptocurrencies have emerged as speculative vehicles of choice for the Millennial generation, but gold and SPDR Gold Trust (GLD) could shine brightly in 2022, breaking out above decade-long resistance at 200. The fund tested that level in July 2020 and pulled back, spending all of 2021 carving the potential handle in a massive cup and handle pattern. A rally above 175 will set off preliminary buying signals in this configuration, setting the stage for an historic breakout.

Catch up on the latest price action with our new ETF performance breakdown.

Disclosure: the author held Visa in a family account at the time of publication. 

A Divergence Between S&P 500 and the Stock Market Breadth May Signal a Market Top

SPX Daily Chart

Based on the comparison between the Percentage of stocks above 200-Day average and the SPX for the past 10 years, the divergence happened since Feb 2021 as the SPX continue to trend higher, the number of stocks participated in the uptrend is getting lesser, deteriorated from 90% to 42% as of last Friday since Feb 2021.

In fact, many growth stocks such as Affirm Holdings (AFRM), CrowdStrike Holdings (CRWD), Fiverr International (FVRR), MercadoLibre (MELI), Sea (SE), Twilio (TWLO), DocuSign (DOCU), Roku (ROKU), PayPal Holdings (PYPL), etc…experienced big drawdowns range from 32%-65% from their all time high.

There are only a handful of outperforming stocks like Apple (AAPL), Microsoft (MSFT), Lam Research (LRCX), Broadcom (AVGO), Qualcomm (QCOM), etc… supporting the S&P 500 index.

The divergence between the SPX and the stock market breadth are certainly not a healthy sign for the bull market especially it has been persisting for nearly 10 months. It might only take a few early capitulations from the funds to trigger a broad market sell-off when the market is at the vulnerable point.

It can be noticed from the chart that 50% level is a support. When the percentage of stocks above 200-Day average dropped below 50%, there was a relatively sharp sell-off in SPX, as highlighted in orange color in 2011, 2014, 2015 and 2018. The market breadth is often acted as a leading indicator before the damage hits the SPX.

Current Market Outlook on S&P 500

S&P 500 did have a rally after an oversold condition at the support area while there was presence of demand as pointed in last week’s article. Detailed analysis can be found by watching the price volume analysis for the market outlook on YouTube.

As shown in the screenshot on 8 Dec from my private Telegram Group for Mastering Price Action Trading course above, the four US major indices – S&P 500 (SPX), Dow Jones (DJI), Nasdaq (IXIC) and Russell 2000 (RUT) are likely in a consolidation with high volatility to both sides.

It is obvious that there was an increase of supply on the down wave since Black Friday selloff, which is yet to be tested. As S&P 500 approaches the resistance zone at 4700, it could be vulnerable for a correction when the sellers step in to lock in profit or initiate short positions. Should a correction happen, the previous swing low near 4500 is a natural area for buyers to step in for bargain hunting.

It is critical to judge the supply level together with the characteristics of the price action (spread and velocity) to anticipate next move. For a bearish scenario, watch out for a Wyckoff up thrust (false breakout) with increasing supply followed by a break below 4650. For bullish case, S&P 500 needs to commit above the resistance level at 4720.

Based on the market breadth and the Wyckoff phase analysis on SPX, a trading range between 4500-4700 is expected. There could be other headwind ahead such as Fed’s tapering of the bond-buying program and an urgency for interest rate hike, which I will be discussing in my weekly live session on Sunday. Click here to visit TradePrecise.com to get your weekly market insights straight to your inbox for free.

Why Roku Stock Is Up By 10% Today

Roku Stock Rallies After Company Reaches Deal To Keep YouTube And YouTube TV On Its Platform

Shares of Roku gained upside momentum after reports indicated that the company managed to reach a deal with Google which will keep YouTube and YouTube TV apps on Roku.

Roku stock has been under strong pressure in recent weeks as the deal with Google was set to expire in December. If companies failed to reach a deal and YouTube was removed from Roku, its stock would have found itself under significant pressure.

The multi-year extension for YouTube and YouTube TV removes the key risk for Roku, and it’s not surprising to see that the stock is up by roughly 10% in today’s trading.

What’s Next For Roku Stock?

Analysts expect that Roku will report earnings of $1.58 per share this year and $1.62 per share in the next year, so the stock is trading at roughly 145 forward P/E.

It should be noted that Roku stock traded near $490 in July but later found itself under significant pressure together with other high-flying pandemic-era leaders. While the stock has lost more than 50% of value in less than half a year, its high valuation remains a concern.

It remains to be seen whether the market will be able to tolerate such valuation levels in case Treasury yields continue to move higher and the Fed gets closer to raising interest rates.

Roku is the second biggest position of the famous ARK Innovation ETF, and traders must watch its performance closely as the continuation of the sell-off in ARKK will inevitably put more pressure on Roku stock.

In the near term, the YouTube deal removed the key risk and may provide additional support to Roku stock. In the longer-term, Roku will need to show solid growth rates or its stock will face another sell-off.

For a look at all of today’s economic events, check out our economic calendar.

Roku Could Rally 25% in the Fourth Quarter

Roku Inc. (ROKU) reports Q3 2021 earnings after Wednesday’s closing bell, with analysts looking for a profit of $0.06 per-share on $680.59 million in revenue. If met, earnings-per-share (EPS) will mark a 33% profit decline compared to the same quarter in 2020, when the small cap benefited from COVID isolation. The stock fell 4% in August despite beating Q2 estimates and raising Q3 guidance, and shed another 27% into early October.

High Volatility and Multiple Headwinds

The streaming provider has been hit with multiple headwinds since reversing at February resistance in July, dropping more than 40%, led by the end of COVID lockdowns and resumption of pre-pandemic activities in many countries. In addition, Amazon.com Inc. (AMZN) has launched its own smart TV brand while Apple Inc.’s (AAPL) new iOS 14 ad-tracking options may also impact revenue driven by Roku’s ad-supported platform.

BofA Securities analyst Ruplu Bhattacharya defended the stock after the summer collapse, noting that “while Roku’s active accounts in F2Q were marginally lower than Street (51.1mn vs. Street 51.8mn), we see this as impacted from transitory supply chain issues, and reopening headwinds, vs. market share loss. Investor expectations have been reset in the near term, in our opinion. Moreover, despite reopenings, Roku’s lead in streaming viewership remained intact in C2Q21.”

Wall Street and Technical Outlook

Wall Street consensus has ignored weak price action, posting an ‘Overweight’ rating based upon 20 ‘Buy’, 5 ‘Hold’, 1 ‘Underweight’, and 1 ‘Sell’ recommendation. Price targets currently range from a low of $310 to a Street-high $640 while the stock is set to open Tuesday’s session just $6 above the low target. This dismal placement reflects a major disagreement with Main Street investors, who have chosen to avoid excessive risk after 2020’s historic 247% return.

Roku mounted the September 2019 peak at 177 in September 2020, entering a powerful uptrend that topped out at 485 in February 2021. The stock fell more than 200 points into May and reversed, recouping the loss into July’s all-time high, which was just six points above the prior peak. The subsequent decline carved the next leg in a broad rectangular pattern that’s now testing range support below 300. The monthly Stochastic oscillator has dropped to the most extreme oversold reading since 2017 at the same time, raising odds for a strong recovery wave.

For a look at today’s economic events, check out our earnings calendar.

Disclosure: the author held no positions in the aforementioned securities at the time of publication.

Roku Could Reward Long-Suffering Shareholders

Roku Inc. (ROKU) is trading higher by nearly 3% in Thursday’s pre-market session after Guggenheim upgraded the streaming television hardware and software provider from ‘Neutral’ to ‘Buy’. The stock has been pulverized since a breakout attempt failed in July, giving up more than 180 points and 36% into this week’s low at 309.67. Numerous technical obstacles remain but price action could now retrace a good portion, or all, of that painful downside.

Resting After Historic 2020 Advance

The Silicon Valley juggernaut rose more than 250% in 2020, carving an historic advance underpinned by pandemic lockdowns and the release of numerous paid streaming services. Those outsized gains generated extremely overbought technical readings, setting the stage for this year’s gross under-performance. It might be a small victory but Roku lifted above the closing print of the last trading day of 2020 after this morning’s upgrade, finally posting a positive year-to-date return.

Stephens analyst Nicholas Zangler outlined his bullish thesis on Roku earlier this quarter, noting “Our overarching thesis is that all linear television ad spend will shift to connected television, driving $9 billion in connected television ad spend to $72 billion over time. In addition, we expect performance marketers that currently spend $134 billion across search and social advertising platforms to divert ad spend into the CTV channel as new technologies have enabled measurement and attribution on the big screen”.

Wall Street and Technical Outlook

Wall Street consensus is rock-solid despite this year’s two-sided tape, with an ‘Overweight’ rating based upon 20 ‘Buy’, 5 ‘Hold’, and 2 ‘Sell’ recommendations. However, price targets are scattered all over the place, currently ranging from a low of $310 to a Street-high $650. The stock is set to open Thursday’s session more than $150 below the median $486 target, highlighting enormous upside potential if more positive catalysts hit the financial headlines.

Roku broke out above 2019 resistance at 176.55 in September 2020 and entered a powerful uptrend that stalled above 485 in February 2021. A three-month decline shed a stomach-churning 213 points before a strong bounce recouped 219 points into July’s all-time high at 490.76. Price action into September carved an unwelcome replay of the first half, reinforcing the lower end of a massive rectangle pattern that now favors an eventual third trip up to range resistance near 500.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Today’s Market Wrap Up and a Glimpse Into Thursday

Stocks tumbled today in response to weaker than expected jobs data. The Dow Jones Industrial Average took the brunt of it, falling more than 300 points and shaving nearly 1% off its value. The S&P 500 was down half a percent while the Nasdaq managed to eke out fractional gains.

Investors were spooked by an ADP jobs report, which revealed that jobs are being added to the private sector at a slower pace than expected. In July, companies added 330,000 payrolls while economists were looking for something along the lines of 690,000. In addition, the outlook for the delta variant isn’t getting any better, and investors are watching and waiting to see if renewed lockdowns will be implemented.

Stocks to Watch

Uber shares are getting punished in extended hours, falling nearly 4% at last check. The ride-share company narrowed its Q2 loss to USD 509 million, but it was still steeper than Wall Street was expecting. Uber and Lyft are both facing driver constraints that have been exacerbated by the resurgence of the virus. On the bright side, Uber had record bookings while revenue grew twofold.

Robinhood shares rallied 50% during the regular session, and according to reports, it was retail investors driving the price higher. Fidelity reportedly had close to 10K buy orders by individual investors early in the session, far outpacing the second most in-demand stock at the broker, GM.

Shares Etsy, an e-commerce site for handcrafted items, dropped 13.5% in extended hours amid signs that the pandemic-fueled shopping boom is winding down. Etsy’s Q2 sales increased by a double-digit percentage but it was less robust than recent quarters. Meanwhile, the company’s Q3 revenue outlook came in below consensus estimates.

Roku’s stock fell more than 8% in the after-hours. The video-streaming hardware company’s Q2 results fell short of estimates as the opening of the economy cut into users’ streaming time. Roku had 55.1 million active users in the quarter across more than 17 billion hours of streaming. The company continues to operate in an uncertain environment while comps from the pandemic year will remain a challenge for the rest of 2021.

Look Ahead

Investors will be on pins and needles until Friday when the employment report for the month of July is released. In the interim, stock futures are barely moving in the after-hours on Wednesday evening, with the three major stock market indexes leaning toward green.

Roku Is Blasting Higher With Big Money

So, what’s Big Money? That’s when a stock goes up in price alongside chunky volumes. It’s indicative of institutions betting on the shares.

Smart money managers are always looking for the next hot stock. And Roku has many fundamental qualities that are attractive.

This sets up well for the stock going forward. But how the stock trades is what points to more upside. As I’ll show you, the Big Money has been consistent in the shares for years.

You see, fund managers are always looking to bet on the next outlier stocks…the best in class. They spend countless hours sizing up companies, reading reports, speaking to analysts…you name it. When they find a company firing on all cylinders, they pounce in a big way.

That’s why I’ve learned how critical it is to gauge Big Money demand for shares. To show you what I mean, have a look at all of the big money signals ROKU has made the last year.

The last few days has seen Big Money activity, too. Each green bar signals big trading volumes as the stock ramped in price. Red signals are showing big selling in the shares:

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Source: www.mapsignals.com, End of day data sourced by Tiingo.com

In 2021, the stock has steadily gained. In June alone, ROKU made 4 of these rare green signals. This came after a big selloff earlier this year when growth stocks were under pressure. Generally speaking, recent green bars could mean more upside is ahead.

Now, let’s check out a few technicals grabbing my attention:

  • YTD outperformance vs. market (+14.93% vs. SPY)
  • YTD outperformance vs. technology ETF (+17.59% vs. XLK)

Outperformance is huge for leading stocks.

Next, it’s a good idea to check under the hood. Meaning, I want to make sure the fundamental story is strong too. As you can see, Roku has been growing revenues rapidly. Take a look:

  • 3-year sales growth rate (+51.45%)
  • 3-year earnings growth rate (-118.17%)

Marrying great fundamentals with technically superior stocks is a winning recipe over the long-term.

In fact, Roku has been a top-rated stock at my research firm, MAPsignals, multiple times the last few years. That means the stock has buy pressure, strong technicals, and growing fundamentals. We have a ranking process that showcases stocks like this on a weekly basis.

ROKU has been a constant Big Money favorite since 2019. And since its first appearance on this report, it’s up +391%:

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Source: www.mapsignals.com, End of day data sourced from Tiingo.com

I wouldn’t be surprised if Roku makes additional appearances in the years to come. Let’s tie this all together.

Roku continues to fire on all cylinders technically alongside growing sales. With many high-quality growth stocks beginning to breakout with Big Money, I like the long-term story of the stock.

The Bottom Line

The Roku rally could have further upside. Big money buying in the shares is signaling to take notice. Shares could be positioned for further upside. Given the historical gains in share price and strong fundamentals, this stock could be worth a spot in a growth-oriented portfolio.

Disclosure: the author holds no position in ROKU at the time of publication.

Learn more about the MAPsignals process here.

Disclaimer

Best ETFs For July 2021

That’s why I spend my time crafting portfolios chock full of outlier stocks. If you choose right, you’ll have enormous gains on your hands in the years to come.

Now, I pick my ETFs perhaps a bit differently than other people. I can find outlier ETFs by tracking the Big Money. But that alone isn’t enough: when I catalog the components and find outlier stocks underneath… that’s the winning recipe.

That’s how I found the best big-money ETFs for July.

First, I looked at all ETFs making Big Money signals by going to MAPsignals.com and scanning the Big Money ETF Buys and Sells chart. I looked for recent days with heavy buying (the bright blue spikes):

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Once I knew which ETFs Big Money was buying, then I wanted the best opportunities. Remember: ETFs are just baskets of stocks. MAPsignals specializes in scoring more than 6,000 stocks daily. Therefore, if I know which stocks make up the ETFs, I can apply the stock scores to the ETFs. Then I can rank them all strongest to weakest.

Once the ETFs were sorted, I noticed Real Estate funds at the top. That’s why this month the top ETF is IYR.

#1 IYR – iShares U.S. Real Estate ETF

As we can see- there was a lot of Big Money buying plowing into this ETF over the last year. It accelerated noticeably since February:

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IYR holds some great stocks. One fine example is PLD (Prologis, Inc.). Below are Big Money signals for PLD:

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#2 BOTZ – Global X Robotics & Artificial Intelligence ETF

A.I. and Robotics are undoubtedly a huge part of our future. Big Money thinks so too. Look at the buying of BOTZ over the last year below.

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One great example stock that BOTZ holds is Intuitive Surgical. They make the surgical robot called DaVinci. It allows remote surgery- a phenomenal technology.

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#3 VDE – Vanguard Energy Sector ETF

Energy was an unloved sector last year. But it’s having a sudden resurgence. Big Money has been buying VDE:

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VDE holds a bunch of great energy stocks. One such stock that has been a Big Money darling in the past is FANG which is seeing a rebirth:

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#4 LIT – Global X Lithium ETF

Like it or not, lithium is the power of the foreseeable future for EVs. Look at all that green last year:

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And LIT holds some great stocks. One of them is the best-known EV manufacturer which is very reliant on lithium: Tesla Inc.

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#5 ARKQ – ARK Industrial Innovation ETF

The media has recently heaped scorn upon Cathie Wood, CEO of ARK Invest after she was Wall Street’s darling last year. The proof is ultimately not in the headlines, but in the Big Money buying. Here we can see clearly that Big Money loved ARKQ last year. The question is: when we see selling (red) should we worry?

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The answer lies in which stocks the ETF holds. And ARKQ holds some great ones. One such outlier is Teradyne:

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Let’s summarize here: the top 3 ETFs (IYR, BOTZ, and VDE) for July score well in terms of MAPsignals’ scores. That means Big Money has been pouring into them:

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LIT and ARKQ however, rank lower on our list of ETFs. This is because of weak technicals. These weaker ETFs represent great potential bargains.

So, there we have the 5 best ETFs for July.

The Bottom Line

IYR, BOTZ, VDE, LIT, & ARKQ represent top ETFs for July 2021. Real Estate, Energy, and Robotics stocks have performed well lately, which should continue. Lithium has an interesting story too. Paying attention to the fundamental quality of ETF constituents is paramount.

To learn more about MAPsignals’ Big Money process please visit: www.mapsignals.com

Disclosure: the author holds long positions in TER in managed accounts, but no positions in IYR, BOTZ, VDE, LIT, ARKQ, PLD, ISRG, FANG, or TSLA at the time of publication.

Charts Source: www.mapsignals.com, FactSet, End of day data sourced from Tiingo.com

Investment Research Disclaimer

Roku Shares Surge on Earnings, Guidance Beat

Roku shares jumped over 11% on Friday after the San Jose, California-based video-streaming device maker reported better-than-expected earnings in the first quarter and delivered strong guidance for the second quarter.

The company that manufactures a variety of digital media players for video streaming reported earnings per share in the first quarter of $0.54, beating the Wall Street consensus estimates of a loss of $0.12 per share.

The digital media hardware company said its revenue jumped 79% year-on-year to $574.18 million, coming in well above analysts’ expectations of $490.56 million. Roku forecasts revenue between $610 million to $620 million in the second quarter, beating the market consensus of $549.5 million.

Following the upbeat results, Roku shares jumped 11.5% to $317.0 on Friday. The stock fell over 4% so far this year.

Analyst Comments

Roku kicked off 2021 with a strong first quarter as revenue and operating income both handily beat FactSet consensus projections based on strong ad revenue growth. The firm only added 2.4 million accounts in the quarter, reaching 53.6 million, as the pandemic may have pulled forward some demand in 2020,” noted Neil Macker, senior equity analyst at Morningstar.

“However, streaming hours continued to expand to 18.3 billion, up another 1.4 billion hours sequentially and 6 billion versus the first quarter last year. We expect that the continued secular trend towards streaming will help drive growth in both streaming hours and revenue per user over the near term. We are maintaining our no-moat rating and our $170 fair value.”

Roku Stock Price Forecast

Twenty-three analysts who offered stock ratings for Roku in the last three months forecast the average price in 12 months of $457.64 with a high forecast of $560.00 and a low forecast of $300.00.

The average price target represents a 44.37% increase from the last price of $317.00. Of those 23 analysts, 19 rated “Buy”, three rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price to $300 with a high of $400 under a bull scenario and $150 under the worst-case scenario. The firm gave an “Underweight” rating on the video-streaming device maker’s stock.

“We believe the market is underestimating the competition on Platform active accounts in the US, as well as the time it takes for international expansion to scale. Active account growth has benefited strongly in the US from share gains at TCL, and sustained growth will require additional share gains or major new smart TV partners,” noted Benjamin Swinburne, equity analyst at Morgan Stanley.

“We believe the market may be underestimating the ability to monetize strong streaming hours growth long term. Not all hours are equally valuable to Roku, and impressive hours growth reported by Roku is at least in part driven by ‘cable’ TV viewing benefit from MVPDs that are likely structurally less valuable to Roku than hours of long-tail publishers.”

Several other analysts have also updated their stock outlook. Keybanc lowered the target price to $460 from $518. Oppenheimer cut the price objective to $400 from $500. Benchmark slashed the stock price forecast to $550 from $600.

JPMorgan trimmed the target price to $500 from $525. Evercore ISI raised the price objective to $430 from $400. Pivotal Research slashed the target price to $350 from $400.

Check out FX Empire’s earnings calendar

U.S. Market Wrap and Forecast for Monday

Early buying pressure faded during Friday’s expiration session, dropping major indices into the red. WTI crude oil reversed, dropping below 60 as temperatures lifted above the freezing mark in Texas and southern states. The 30-year bond posted another monthly low, continuing the relentless rise in yields across short- and long-dated instruments. Gamestop Inc. (GME) hit a monthly low, forcing another batch of Reddit traders to look for a less stressful hobby.

Roku Rocks

Roku Inc. (ROKU) posted a Q4 2020 profit of $0.49 per-share, well above expectations for a $0.03 loss, lifting the streaming hardware provider to a three-day high. However, rich valuation weighed on buying interest, stalling price well below Tuesday’s all-time high at 486.72. Deere and Co. (DE) reported the second blowout quarter in a row, lifting the agricultural giant to an all-time high above 330. The stock rose more than 55% in 2020 and has added another 20% so far in 2021.

Russell-2000 index ignored blue chip selling pressure, lifting into the midpoint of the weekly trading range. This instrument has rallied 55% since September, carving one of the strongest small cap buying waves since the 1990s. Speculative fervor in the Reddit crowd is driving the upside, with SPACs acting as petri dishes for hundreds of start-up operations. Unfortunately, most small caps won’t succeed down the road due to roadblocks set up by trillion dollar mega-techs.

Post-Options Hangover Ahead

Discovery Inc. (DISCA) could provide early metrics on the paid streaming service it launched in January in Monday’s pre-market earnings release. Home Depot Inc. (HD) and Lowes Inc. (LOW) lead next week’s blue chip calendar, highlighting do-it-yourself income during the pandemic’s second wave. The bubble in mall anchors could break after department stores release miserable quarterly results, which should confirm the slow bleed of long-term customers.

Consumer confidence and durable goods head next week’s economic calendar, along with new home sales. Millennials have entered their nesting stages, scooping up the limited supply of existing homes and driving prices to all-time highs. The supply crunch is forcing many nest builders to take advantage of remote work opportunities and build homes far away from west coast and northeast urban centers, in a phenomenon that will alter US demographics for decades.

For a look at all of today’s economic events, check out our economic calendar.

Roku Tops Q4 Earnings Estimates; Provides Upbeat Guidance

Roku, an American publicly-traded company that manufactures a variety of digital media players for video streaming, reported better-than-expected earnings in the holiday quarter with total active accounts rising 14.3 million in the year to 51.2 million.

San Jose, California-based video-streaming device maker said its total net revenue surged about 60% to $649.9 million, above the market expectations of $617.25 million. Adjusted profit came in at $0.49 per share, beating the Wall Street consensus estimates of $0.05 per share.

“There is often a degree of noise in ROKU‘s results mainly due to the revenue structure complexity in the Platform segment, which, in some quarters, masks strong core business results. We don’t see any noise this quarter and think the stock should react positively. Video advertising Y/Y growth accelerated to >100%; the commentary on the growth in SVOD subscription revenue stands out as an incremental positive,” said Vasily Karasyov, equity analyst at Cannonball Research.

However, Roku‘s shares, which surged nearly 150% last year, dipped about 1% to $452.99 on Thursday. The shares rose as high as 3% in extended trading.

The digital media hardware company forecasts total revenue in the range of $478 million and $493 million for the first quarter. That was higher than the market expectations of nearly $462 million.

Roku Stock Price Forecast

Sixteen analysts who offered stock ratings for Roku in the last three months forecast the average price in 12 months of $413.60 with a high forecast of $500.00 and a low forecast of $250.00.

The average price target represents a -8.70% decrease from the last price of $452.99. From those 16 analysts, ten rated “Buy”, five rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $275 with a high of $450 under a bull scenario and $150 under the worst-case scenario. The firm gave an “Underweight” rating on the video-streaming device maker’s stock.

Roku‘s Platform segment revenue growth benefited from both secular and COVID-19-related tailwinds. Gross margins a notable standout. Looking ahead, 1Q guidance is in-line and the company noted 2H deceleration likely. Remain ‘Underweight’ as valuation reflects success in our view,” said Benjamin Swinburne, equity analyst at Morgan Stanley.

Several other analysts have also updated their stock outlook. Truist Securities raised the target price to $390 from $220. Deutsche Bank upped their price objective to $400 from $260 and gave the stock a buy rating.

Moreover, JP Morgan set an overweight rating and a $475 price objective. Zacks Investment Research gave a buy rating and set a $352 price target. Citigroup increased their price target to $460 from $375 and gave the company a buy rating.

Analyst Comments

“We believe the market is underestimating the competition on Platform active accounts in the U.S., as well as the time it takes for international expansion to scale. Active account growth has benefited strongly in the U.S. from share gains at TCL, and sustained growth will require additional share gains or major new smart TV partners,” Morgan Stanley’s Swinburne added.

“We believe the market may be underestimating the ability to monetize strong streaming hours growth long term. Not all hours are equally valuable to Roku, and impressive hours growth reported by Roku is at least in part driven by ‘cable’ TV viewing benefit from MVPDs that are likely structurally less valuable to Roku than hours of long-tail publishers.”

Upside and Downside Risks

Risks to Upside: Strong user adoption increases scale and leverage against content partners to secure greater advertising-supported content; international expansion can drive incremental advertising – highlighted by Morgan Stanley.

Risks to Downside: New product/feature launches by competitors could pressure Roku‘s account growth and time spent. Competitors could announce competing software licensing deals with smart TV manufacturers.

Check out FX Empire’s earnings calendar