Expert: Roku's Post-Q3 Run Could Be Masking Balance Sheet Concerns

Roku Inc ROKU's post-IPO performance has been highly volatile.

After sinking to a low of $15.75, the stock soared as high as $48.80 on Tuesday after the company impressed investors in its earnings report. However, shares of Roku ended Tuesday's session lower by more than 13 percent, which has many investors confused if the rally was an overreaction or if new highs can be seen soon.

The Expert

Chantico Global's CEO Gina Sanchez.

The Strategy

Roku's lifespan as a public company is short and too early to gauge its future success.

The Thesis

There is little doubt that Roku's earnings report showed it's "on to something" to become a leader in the smart TV and software platform, Sanchez said during a recent CNBC "Trading Nation" segment. But the stock also got well ahead of itself in reaction to the earnings report as perhaps the company's growing liabilities have taken a backseat to its strong performance.

"Watching a company grow on the liability side means that they're sort of piling up cash to look good for their earnings reports, but not necessarily paying their liabilities," Sanchez said. "That's a question you have to look at."

Bottom line, investors need to pay attention to both the company and its balance sheet and for the time being it's still "early in the game" to determine the company's future level of success.

Price Action

After losing more than 13 percent on Tuesday, shares of Roku were trading lower by another 5 percent heading into Wednesday's open.

Related Links:

Roku CEO: 'Everyone Over Time Is Going To Shift Toward Streaming'

Roku Downgraded, Analyst Calls Stock Too Expensive