Roku Stock: Explaining Tuesday’s Spike


Roku Stock (NASDAQ:ROKU)

As of 11 a.m ET on Tuesday, Roku stock was up 5%, compared to the S&P 500’s 1% gain.

The video streaming firm’s stock price increase was mainly caused by the general market upswing. Some good news concerning Roku’s hardware was also revealed.

What’s the Reason?

Roku (NASDAQ:ROKU) announced the debut of its Ultra premium streaming device in Canada through a press release. The hardware division has been a significant drain on the company’s resources. According to a report from late July, management saw that following an initial epidemic rise, demand for streaming devices had decreased. In addition, the company’s production expenses have increased faster than it has been able to increase pricing. As a result of these circumstances, Roku’s second-quarter gross profit margin dropped from 65% to 59%.

The developments on Tuesday do not bode well for easing the drain on profits. However, Roku’s efforts to promote high-definition 4K goods should aid in this regard. A retail price of $130 might be ideal for stimulating interest in the product while also increasing revenue. Still, even a slight improvement in Roku’s hardware forecast might boost the stock, which is down over 70% this year.

What’s Next?

Investors will keep a close eye on Roku stock until it releases its following quarterly report in early November to see how the company handles the two largest drags on its business. One is slowness in hardware. However, this issue may be mitigated by the increased cost of Roku devices. Another primary concern is the falling demand for advertising on its site.

The company makes more money when advertising prices go up, and people buy more streaming devices and spend more time watching content on Roku (NASDAQ:ROKU). If one area of Roku’s business faltered, the company’s diversified revenue strategy would still enable it to expand into related areas. Given the company’s expected to return to profitability and growing profit margins, investors may want to keep an eye on Roku stock.

Featured Image-  Megapixl @ Adodonov

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About the author: I'm a financial journalist with more than 1.5 years of experience. I have worked for different financial companies and covered stocks listed on ASX, NYSE, NASDAQ, etc. I have a degree in marketing from Bahria University Islamabad Campus (BUIC), Pakistan.