Roku stock just had its worst day since 2018

Key Points
  • Roku shares slid Friday after the company reported a revenue miss on Thursday for the fourth quarter and gave first-quarter guidance that was below analysts' expectations.
  • The company's first-quarter revenue guidance implies a further sales slowdown.
  • Roku blamed the slowing revenue growth on continued supply chain disruptions impacting the U.S. television market.

In this article

People pass by a video sign display with the logo for Roku, a Fox-backed video streaming company, Sept. 28, 2017.
Brendan McDermid | Reuters

Roku shares closed down 22.29% on Friday after the streaming company reported fourth-quarter revenue on Thursday evening that missed expectations and gave disappointing guidance for the first quarter.

It's the worst day since Nov. 8, 2018, when shares also fell 22.29%. Shares of Roku are about 77% off their highs on July 27, 2021.

The company posted revenue of $865.3 million, which fell short of analysts' projected $894 million. Revenue grew 33% year over year in the quarter, which is slower than the 51% growth rate it saw in the previous quarter and the 81% growth it posted in the second quarter.

The ad business has a huge amount of potential, says Roku CEO Anthony Wood
The ad business has a huge amount of potential, says Roku CEO Anthony Wood

Analysts pointed to several factors that could lead to a rough period ahead. Pivotal Research on Friday decreased its rating on Roku to sell from hold and significantly slashed its price target to $95 from $350.

"The bottom line is with increasing competition, a potential significantly weakening global economy, a market that is NOT rewarding non-profitable tech names with long pathways to profitability and our new target price we are reducing our rating on ROKU from HOLD to SELL," Pivotal Research analyst Jeffrey Wlodarczak wrote in a note to clients.

For the first quarter, Roku said it sees revenue of $720 million, which implies 25% growth. Analysts were projecting revenue of $748.5 million for the period.

Roku expects revenue growth in the mid-30s percentage range for all of 2022, Steve Louden, the company's finance chief, said on a call with analysts after the earnings report.

Roku blamed the slower growth on supply chain disruptions that hit the U.S. television market. The company said it chose not to pass higher costs onto the customer in order to benefit user acquisition.

The company said it expects supply chain disruptions to continue to persist this year, though it doesn't believe the conditions will be permanent.

"Overall TV unit sales are likely to remain below pre-Covid levels, which could affect our active account growth," Anthony Wood, Roku's founder and CEO, and Louden wrote in the company's letter to shareholders. "On the monetization side, delayed ad spend in verticals most impacted by supply/demand imbalances may continue into 2022."

WATCH: The ad business has a huge amount of potential, says Roku CEO Anthony Wood