Insights

Why Roku Stock Is Dropping Today

What happened
Shares of Roku (NASDAQ: ROKU) were trading down 8.2% as of 12:27 p.m. ET on Tuesday.  
While the stock was falling on a down day for the markets, there was positive news for Roku on the content-acquisition front. Lions Gate Entertainment announced a partnership with The Roku Channel to give users exclusive, free access to Lionsgate’s theatrical releases. 
So what
This agreement is the latest move to bring more exclusive content to Roku’s free ad-supported channel to attract more users. Roku originally launched The Roku Channel in 2017, and it’s been growing much faster than the rest of the platform. It’s now among the top five channels on the platform, with streaming hours on The Roku Channel more than doubling year over year in 2021. 
Just last week, Roku announced a green light for the new Roku Original series Honest Renovations, hosted by Jessica Alba. This follows a serious push the company made last year when it launched 30 Roku Originals in May. 
However, the company experienced decelerating account growth throughout the year. The company reported active account growth of 17% in the fourth quarter of 2021, a far cry from the 39% reported in the same quarter of 2020. That explains why the stock is down 80% from its all-time high, and why investors continue to punish the streaming platform.

Image source: Getty Images.

Now what
It might take a while for the original content investments to pay off. Roku is dealing with major economic headwinds in the near term, with inflation, tight supply chains, and lower consumer demand pressuring growth. Investors shouldn’t expect exciting numbers when Roku reports first-quarter earnings results on Thursday, April 28.  
John Ballard has no position in any of the stocks mentioned. The Motley Fool owns and recommends Roku. The Motley Fool has a disclosure policy. –

What happened

Shares of Roku (NASDAQ: ROKU) were trading down 8.2% as of 12:27 p.m. ET on Tuesday.  

While the stock was falling on a down day for the markets, there was positive news for Roku on the content-acquisition front. Lions Gate Entertainment announced a partnership with The Roku Channel to give users exclusive, free access to Lionsgate’s theatrical releases. 

So what

This agreement is the latest move to bring more exclusive content to Roku’s free ad-supported channel to attract more users. Roku originally launched The Roku Channel in 2017, and it’s been growing much faster than the rest of the platform. It’s now among the top five channels on the platform, with streaming hours on The Roku Channel more than doubling year over year in 2021. 

Just last week, Roku announced a green light for the new Roku Original series Honest Renovations, hosted by Jessica Alba. This follows a serious push the company made last year when it launched 30 Roku Originals in May. 

However, the company experienced decelerating account growth throughout the year. The company reported active account growth of 17% in the fourth quarter of 2021, a far cry from the 39% reported in the same quarter of 2020. That explains why the stock is down 80% from its all-time high, and why investors continue to punish the streaming platform.

Image source: Getty Images.

Now what

It might take a while for the original content investments to pay off. Roku is dealing with major economic headwinds in the near term, with inflation, tight supply chains, and lower consumer demand pressuring growth. Investors shouldn’t expect exciting numbers when Roku reports first-quarter earnings results on Thursday, April 28.  

John Ballard has no position in any of the stocks mentioned. The Motley Fool owns and recommends Roku. The Motley Fool has a disclosure policy.

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