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Why Roku Stock Fell Today

By Chris Neiger - May 6, 2021 at 1:41PM

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Some investors are selling the stock ahead of Roku's first-quarter results.

What happened

Shares of Roku (ROKU -0.53%) were falling today as the company is set to release its first-quarter results at the end of the trading day. 

The tech stock was down by 7.9% as of 1:26 p.m. EDT. 

So what 

Roku's management issued first-quarter guidance back in February, with sales expected to be $485 million at the midpoint of guidance, representing a 51% increase year over year. Additionally, the company expects a gross profit of about $238 million and adjusted EBITDA of $31 million, both at the midpoint.

A red line graph on a dark background.

Image source: Getty Images.

Management's outlook doesn't appear to be all that bad and investors have had plenty of time to process that information. So why did Roku's stock drop today?

Some investors may be getting nervous about holding on to Roku's stock as the U.S. economy begins to open back up. Roku benefited as people socially distanced and were in lockdowns much of last year, forcing them to spend more time at home. 

That led to more TV watching and helped Roku add 14 million new active accounts in 2020 and pushed the company's total revenue up 58% from the previous year.

But investors have been shying away from tech stocks since the beginning of this year and putting their money into companies that they believe will grow as the U.S. emerges from the pandemic.

As a result, Roku's stock is down 15% year to date, including today's drop. 

Now what 

With investors still trying to figure out exactly how fast the U.S. economy will open back up and how different Roku's business will look now that many Americans are no longer stuck at home, it's likely that there could be more volatility from Roku's stock in the weeks and months ahead.

Chris Neiger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Roku. The Motley Fool has a disclosure policy.

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