Roku shares dropped as much as 25% in premarket trading Friday after the streaming company reported fourth-quarter revenue on Thursday evening that missed expectations and gave disappointing guidance for the first quarter.
The decline is on top of the 10.3% drop Roku posted on Thursday before it published earnings. And if the move holds until close, it could mark Roku’s worst day of trading ever. Its biggest drop to date was on Nov. 8, 2018, when shares fell 22.29%. Before markets opened, shares of Roku were 70.51% 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 last quarter and the 81% growth it posted in the second quarter.
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% revenue growth. Analysts were projecting first-quarter revenue of $748.5 million.
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 following 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 letter. “On the monetization side, delayed ad spend in verticals most impacted by supply/demand imbalances may continue into 2022.”