Cathie Wood of ARK Invest has Roku as one of the biggest investments in her funds.
Eva Marie Uzcategui/Bloomberg
Roku’s earnings report last week sent shares into a free fall, but Cathie Wood’s ARK Invest was among the buyers.
Roku (ticker: ROKU) stock fell 23% on Friday after the company reported disappointing results and warned of uncertainty ahead for the advertising market. But the stock was up 10.1% to $72.14 in Monday trading after Cathie Wood’s ARK Invest disclosed the ARK Innovation ETF (ARKK) bought 373,857 shares on Friday. ARK Next Generation Internet exchange-traded fund (ARKW) and the ARK Fintech Innovation ETF (ARKF) also bought 37,570 and 37,570 shares, respectively, on Friday.
Roku operates a platform that lets users access popular streaming services, taking a cut of ads and subscriptions. Roku is best known for its streaming sticks that plug into TVs to provide access to the Roku platform. Roku stock is the third-largest holding in Wood’s flagship innovation fund, with a 6.39% weight. The stock is the fourth-largest holding in the ARKW fund with a 6.82% weight. It has just a 0.99% weight in the fintech fund.
The stock had traded as high as $434.49 in the past year before sinking as analysts cut their expectations for growth amid the reopening. Now, concerns about the economy have further weighed on the firm’s prospects, as advertisers are dialing back spending.
BofA Securities analyst Ruplu Bhattacharya cut his rating all the way to Underperform from Buy, slashing his price target to $55 from $125 in a note on Friday. That target represents nearly 24% downside from recent levels.
Bhattacharya expects inflation, recession, and supply chain headwinds to persist for the next two to three quarters. He warned that the fourth quarter could be worse than the third quarter, if the macroeconomic environment worsens.
“The bulls will point to Roku’s larger scale and that valuation is back to prepandemic levels; however, we do not see an easy fix to the monetization problem in the near-term,” Bhattacharya added.
Write to Connor Smith at [email protected]
