What happened
Growth stocks got hit with another round of big sell-offs today, and Roku (ROKU -3.05%) was once again caught up in the pullback. The streaming-video specialist's stock ended Tuesday's daily trading session down roughly 9.3%, while the S&P 500 and Nasdaq Composite indexes ended the day down 1.4% and 2%, respectively.
Tech stocks soared last week after comments from Federal Reserve officials suggested that the central banking authority could take a softer approach to raising interest rates this month. However, thus far, the resulting optimism seems to have been short lived. Following last week's big gains, investors are once again taking a more cautious stance on the market, and Roku stock has now given up all the gains it posted across last week's trading.
So what
A combination of rising bond yields, new business data, and concerns that the Federal Reserve will continue to raise interest rates until the economy is pushed into recession in order to fight inflation has prompted another stark pullback for the broader market this week. Paramount Global also warned that investors should expect lower advertising revenue in the fourth quarter, and comments suggesting a tougher outlook for the streaming-based ad space likely also prompted additional selling pressures for Roku stock.
Now what
Roku stock has now plummeted roughly 78% year to date, and it trades approximately 89% off from the lifetime high that it reached last year.In addition to the challenging macroeconomic backdrop, Roku has seen its sales growth decelerate substantially in 2022, and the business has swung back to recording operating losses after posting operating profits lats year.
While the company is facing a more difficult operating backdrop in the near term and macroeconomic pressures could continue to depress valuations for the market at large, I also think that sell-offs have pushed the stock down to levels that leave attractive room for long-term upside. Roku now has a market capitalization of roughly $7.1 billion and is valued at approximately 2.3 times this year's expected sales, and it could be a worthwhile buy for risk-tolerant investors willing to weather volatility.
