Roku (ROKU 0.25%) shareholders beat the market through most of this week, with the stock rising 6% through Wednesday trading before slumping during Thursday's sell-off. The stock is now down about 0.7% compared to a 0.3% drop in the S&P 500, according to data provided by S&P Global Market Intelligence.
The shifts didn't do much to erase the losses that investors have seen with the streaming video giant since the start of 2022. However, Roku's stock is benefiting from more optimism following its late April earnings announcement.
Roku's first-quarter report did show a few signs of strain on the business. Smart TV sales, for one, are being pressured by supply chain issues. Costs are also soaring for key inputs, which has hurt profit margins for its streaming video devices.
But the company is still steadily growing its user base and engagement, in contrast to peers like Netflix. And marketers are increasingly turning to its platform to host their advertising.
These positive factors helped push the stock higher immediately following its Q1 earnings report, and in the subsequent first few days of May. Roku's flexibility is especially attractive, given that it can earn profits in many ways as more advertising spending shifts away from traditional TV and into the streaming space.
Roku is still expecting to grow sales by about 35% in 2022, which implies accelerating revenue trends in the second half of the year. Risks to that outlook include a quicker move by consumers away from digital entertainment spending in favor of categories that were underutilized in the pandemic, like travel. Roku might see weaker earnings if advertising rates fall, too.
Those risks seem to be already priced into the stock, which remains down by nearly 60% so far in 2022. As a growth stock that's still working to generate sustainable profits, Roku isn't finding much love on Wall Street right now.
But that sentiment could change if the company continues reporting solid operating results, as it did in last week's announcement.