What happened

Shares of Roku (ROKU -0.40%) were trading down 5% as of 10:49 a.m. ET on Wednesday, following a weaker-than-expected earnings report from Walt Disney

Roku stock has fallen nearly 80% year to date over worries of a slowing advertising market and weaker revenue growth. Disney's outlook didn't raise investors' hopes of a turnaround, which sent the stock to new lows.

So what

Roku relies on growth from the top streaming services to drive more sign-ups for its TV streaming platform, but after Disney+ posted a subscriber increase of 12 million last quarter, Disney expects only a slight increase in subscribers next quarter.

Disney also reported lower advertising revenue across its media networks and Disney+ Hotstar, in which advertising is the cash cow for Roku. Uncertainty in the economy and lower ad spending have been the main headwinds for Roku this year, and it may not get better anytime soon. 

Disney is preparing to launch its ad-supported streaming plan in December but said it won't meaningfully impact financials until later next year. Some investors may interpret that as another weak signal for advertising demand.

Roku's valuation is starting to look cheap as the stock continues to fall, but Wall Street traders are still looking for a near-term catalyst before buying.

Now what

Roku has maintained stable growth in active accounts this year, but the main problem has been decelerating growth in revenue from lower ad spending.   

Roku has a huge opportunity to win share of digital ad spend as it shifts away from traditional media, but the stock is not likely to rebound until the company reaccelerates its revenue growth. Investors should prepare for more volatility in the share price in the near term.