Roku Inc. shares tumbled Friday, with the streaming-video platform company the latest example of a one-time pandemic favorite to see a precipitous decline as investors look past an era where consumers are no longer stuck indoors.
The shares tumbled as much as 29%, their biggest one-day drop on record, in the wake of fourth-quarter results that missed expectations and an outlook that was seen as weak, prompting at least one analyst downgrade. The stock is now down more than 75% off a peak hit in July, trading at its lowest since June 2020.
It’s a sharp reversal for Roku, which was among the stay-at-home winners amid the Covid-19 pandemic that shuttered cities for months on end. The stock gained nearly 150% in 2020 as the coronavirus accelerated a shift toward streaming video among consumers. Investors are now reassessing the valuation it had received, as they rotate out of high-growth tech names.
“At a time when interest rates were near zero and retail money poured into the equity markets, Roku was a perfect stock to own,” wrote Michael Nathanson, an analyst at MoffettNathanson, who has a sell rating on the stock. He noted that Roku had some blockbuster quarterly reports in the pandemic era, helped by growth in streaming video. “As the enterprise value pushed higher and higher, it just became harder and harder to justify that valuation.”
The collapse in Roku reflects what has become a familiar theme this earnings season, as other pandemic favorites have swiftly fallen out of favor. Netflix Inc., which also benefitted from the boon in at-home entertainment, collapsed more than 20% after it gave a disappointing forecast for new customers in January. Peloton Interactive Inc., which briefly skyrocketed as closed gyms pushed people to work out from home, is now struggling with slowing demand. Netflix shares are down more than 40% from their peak, while Peloton has collapsed more than 80% off a peak from January 2021.
Other one-time winners, including video-game platform Roblox Corp. and the Canadian e-commerce company Shopify Inc., have also seen rallies come to a shuddering halt. Both are down more than 60% from their peaks.
There are few other pandemic favorites that are yet to report. Etsy Inc., the e-commerce company that saw strong pandemic demand for face masks and other products, is due to report next week. Results from Zoom Video Communications Inc. are scheduled for later in the month, while e-signature company DocuSign Inc. reports in March.
