It’s the second such event this year. Roku Stocks traded on NASDAQ (NASDAQ:) have experienced a bear market selling-off with a peak to trough drop of 34.9%.

The turbulent ride has been no less than a blur for the investors of streaming hardware company.

Roku may still be in the very early stages of its growth story. The stock was not able to live up its high-priced second quarter.

Despite the recent price decline, I am more likely to remain neutral about the name. TipRanks shows Roku stock chart.

Roku: Q2 was not good enough

Roku beat the Street consensus by posting $0.52 per share earnings.

The revenue climbed to $645million, an amazing 81% increase year-over-year and surpassing management’s initial guidance. At first glance it appeared that Roku had yet another great year. However, investors found some hair after the quarter and this led to the negative stock reaction.

Roku added 1.5 million accounts in the fourth quarter. It’s impressive. However, considering COVID-19 tailwinds as well as the fact that this number was actually lower year-over–year and quarter–over–quarter, some worry that user growth might slow.

The Competition is Fierce

Even though Roku holds a significant share of streaming hardware sales, you can’t help but observe that tech companies (specifically members of FAANG) are making fierce pushes for users.

Roku stock has been under severe selling pressure because of global issues in its hardware supply chain.

Roku’s ad-supported content has been gaining significant attention. Certain consumers have been raving about its ad-supported content.

Roku’s ability to continue to execute in advertising will more than compensate for any hardware-related pressures. This is a huge “if”, as it’s entering an industry that may be less favorable in 2022.

The pre-pandemic period saw hardware sales decline significantly. Roku’s success lies in high-margin business. If Roku is able to keep its competitors away, it will be able to leverage the network effects to its benefit and continue to push towards profitability.

Wall Street Take

TipRanks analyst consensus rate ROKU stock as a Strong Buy. There are 17 analyst ratings. Two Hold recommendations and one Sell recommendation.

The average Roku price target is $475. Price targets for analysts can range anywhere from $310 per Share to $650 Per Share.

The Bottom Line

Roku is performing well, although shares trade at more than 17 times the sales. It seems a bit expensive. It appears that there is fierce competition.

Disclosure: Joey Frenette does not own any shares in the companies mentioned at time of publication.

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