Roku Could Rally 25% in the Fourth Quarter

Roku Inc. $Roku Inc (ROKU.US)$ (ROKU) reports Q3 2021 earnings after Wednesday’s closing bell, with analysts looking for a profit of $0.06 per-share on $680.59 million in revenue. If met, earnings-per-share $Wisdomtree U.S. Largecap Fund (EPS.US)$ (EPS) will mark a 33% profit decline compared to the same quarter in 2020, when the small cap benefited from COVID isolation. The stock fell 4% in August despite beating Q2 estimates and raising Q3 guidance, and shed another 27% into early October.

High Volatility and Multiple Headwinds
The streaming provider has been hit with multiple headwinds since reversing at February resistance in July, dropping more than 40%, led by the end of COVID lockdowns and resumption of pre-pandemic activities in many countries. In addition, Amazon.com Inc. $Amazon (AMZN.US)$ (AMZN) has launched its own smart TV brand while Apple Inc.’s $Apple (AAPL.US)$ (AAPL) new iOS 14 ad-tracking options may also impact revenue driven by Roku’s ad-supported platform.

BofA Securities analyst Ruplu Bhattacharya defended the stock after the summer collapse, noting that “while Roku’s active accounts in F2Q were marginally lower than Street (51.1mn vs. Street 51.8mn), we see this as impacted from transitory supply chain issues, and reopening headwinds, vs. market share loss. Investor expectations have been reset in the near term, in our opinion. Moreover, despite reopenings, Roku’s lead in streaming viewership remained intact in C2Q21.”