Trading Strategies For Roku Stock Before And After Q1 Earnings

Zinger Key Points
  • Analysts, on average, estimate Roku will report a loss of $1.37 per share on revenues of $708.49 million.
  • Roku is trading in a downtrend under the 200-day SMA.

Roku, Inc ROKU opened slightly higher Wednesday's session but ran into a group of sellers who knocked it down under Tuesday’s low-of-day. Roku is set to print its first-quarter financial results after the market closes.

When Roku printed its fourth-quarter earnings beat on Feb. 15, the stock surged over 11% the following day but ran into a group of sellers near the $76 mark. Since then, Roku has declined to trade under the 200-day simple moving average.

For the fourth quarter, Roku reported revenue of $667.1 million, which beat the $809.7-million consensus estimate. The company reported earnings per share of negative $1.70, beating a consensus estimate for a loss of $1.72.

For the first quarter, analysts, on average, estimate Roku will report a loss of $1.37 per share on revenues of $708.49 million.

Ahead of the event, Benchmark analyst Daniel Kurnos maintained a Buy rating on Roku Tuesday and maintained an $89 price target.

From a technical analysis perspective, Roku’s stock looks neutral heading into the event, having settled into an downtrend pattern on the daily chart but consolidating under the 200-day simple moving average (SMA).

It should be noted that holding stocks or options over an earnings print is akin to gambling because stocks can react bullishly to an earnings miss and bearishly to an earnings beat. A company’s guidance for subsequent quarters, which is often provided during a conference call, can also heavily affect a stock’s direction.

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The Roku Chart: Roku has been consolidating under the 200-day SMA since Feb. 23. The stock temporarily broke up above area on Feb. 16, following its last earnings print, but couldn’t hold the area as support.

  • On April 20, Roku broke down from a sideways consolidation pattern, which set the stock into a downtrend. The most recent lower high was formed on April 18 at $65.10 and the most recent confirmed low was printed at the $60.42 level on April 12.
  • Although the stock is in a downtrend, it hasn’t bounced up to print a subsequent lower high in six trading days, indicating a rebound is likely in the cards over the next few days. Bullish traders want to see Roku receive a positive reaction to its earnings print, which could help the stock regain the 200-day SMA.
  • Bearish traders want to see big bearish volume come in and push Roku under the March 13 low of $54.50, which could indicate a longer-term and steeper downtrend is on the horizon.
  • Roku has resistance above at $61.50 and $72.83 and support below at $55.88 and $50.25.

Photo via Shutterstock.

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