Shares of Roku (ROKU -0.52%) were down 7.2% at 10:31 a.m. ET on Thursday. Positive company news around the launch of its new smart-home products with Walmart and the launch of The Roku Channel in Mexico was washed out by negative news on the economy.
The Consumer Price Index rose 0.4% in September, or 8.2% for the year, which was higher than analysts expected and much higher than the Federal Reserve's 2% target. The news was disappointing for market traders who were hoping for a deceleration in the rate of inflation and, therefore, an end to rising interest rates.
The slowdown in the advertising market this year has sent Roku's share price down 78% year to date. However, the Walmart news and expansion in Mexico could be huge and position Roku for more growth over the long term.
The uncertainty in the economy is forcing advertisers to be more cautious with their budgets. Roku saw its revenue growth decelerate in the second quarter to 18% year over year, down from 28% in the first quarter.
Inflation and supply chain issues have been particularly challenging for Roku's sales of streaming devices, such as Roku TV sticks and Roku-powered TVs. Retailers have recently lowered prices on TVs to sell excess inventory, but overall, TV unit sales have been very weak this year. This has made it difficult to acquire new users to Roku's TV operating system, on which it monetizes users with ads and content transactions.
All the bad news today overshadows some positive developments for Roku over the last few days. On Wednesday, Roku launched a new suite of smart-home products, complete with video doorbells and cameras available exclusively across nearly 3,500 Walmart stores.
Roku's international expansion is still a big long-term opportunity. It just announced the launch of its ad-supported Roku Channel in Mexico. This means that when the advertising market comes back, Roku should be primed for more growth.