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Why Roku Dropped 6% Today

By Howard Smith – Sep 3, 2020 at 4:25PM

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The leader in streaming TV platforms is off slightly more than the market average on an overall down day.

What happened

Shares of Roku (ROKU -3.87%) are down 6% on a day the technology sector is leading the Nasdaq Composite index to give up more than a week's worth of gains.

Roku shares have recently advanced faster than the index, however, and are only retreating today back to the level last seen on Aug. 27. 

person with remote in hand watching streaming tv

Image source: Getty Images.

So what

Roku shares had gained almost 10% last week after some bullish analyst comments. With today's dip in the index, the technology-heavy Nasdaq is still up almost 27% year to date. Roku shares have matched that closely with a 24% gain. 

Fast-growing stocks tend to have more volatility, and that likely explains today's moves in both the stock and the index. 

Now what

As Roku continues to grow in the U.S., it has also implemented an international growth strategy. In its second-quarter earnings reported on Aug. 5, the company said that its streaming player sales more than doubled versus the previous-year period in Canada and the U.K. While Roku TV sales account for one in every three smart TVs sold in the U.S., they already account for 25% of those sold in Canada. 

The company says it is also growing its footprint in Mexico, and Roku TV model sales are off to a good start in Brazil. Its total net revenue grew 42% in the second quarter, compared to the year-ago period. 

Today's move shouldn't be unexpected in the volatile world of fast-growing stocks. Investors who enjoy the oversized short-term gains in growth stocks should be prepared for some sharp short-term moves in the other direction as well. 

Howard Smith owns shares of Roku. The Motley Fool owns shares of and recommends Roku. The Motley Fool has a disclosure policy.

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