SA After Hours: Roku (Again)
Roku has not done very well since my article from early Feb. In this SA After Hours, even more reason for bulls to consider adding shares down here.
Just two weeks after calling the bottom in Roku, the stock is down another 30% from where it was when my first Roku article for Seeking Alpha was published. At yesterday's low, Roku shares were down 79% from the stock's 52 week high. Almost all of the decline since the time of my first February article came as a reaction to Roku's Q4 revenue miss and soft forward guidance. The market took the opportunity to pummel the bulls to smithereens. While I am by no means calling bottom again (I promise), I did follow up with another Seeking Alpha article this weekend to go over why I was buying the falling knife on Friday.
You can peep at the comments, but don't fall for that.
the GOAT
As I've said in previous SA After Hours pieces, I usually don't read comments in my Seeking Alpha articles when the coverage is of something highly polarizing. Bitcoin is a good example. I usually never read the comments in my Bitcoin articles because I've found there isn't much of a value add from Bitcoin commentary. I've occasionally noticed a lack of value add in certain equities too, again because of a polarization that comes with some names. I did notice some of the trolling from my bottom call article centered around following Cathie Wood into a trade. People really don't like Cathie Wood.
There are a variety of reasons why that's probably the case but I think the biggest reason for the Wood hate is because she made a lot of money in 2020 betting on unprofitable growth companies that benefited from a zero interest rate/QE tailwind. I think that's a lazy reason to dislike her, to be totally honest. ZERP and QE are probably the main reasons why just about everyone has seen their portfolio valuations increase so much since the financial crisis. She's playing the game. Just like the rest of us. I'm a rare breed in finance publishing. I'm a Cathie Wood moderate. I don't think she's a complete idiot. I also don't think she's a genius. I think she got very lucky in 2020. But I also think she made her own luck and that's half of being lucky.
But I'm getting to the point, I promise. I had a few minutes this afternoon to read some of the comments from my latest article and there were a lot of very good ones. This is the one I felt like sharing here and it comes from a poster called "greedyfellow:"
On Friday, half of all Roku shares outstanding traded. 66.5M shares traded compared to 132M shares outstanding. To go lower, don't you need sellers? Who's left to sell?
Turning over half the shares outstanding is a pretty incredible feat for a company with a $15 billion market cap. For context, the 66.5 million shares traded on Friday would be just under 10 times the average daily volume. That's bonkers activity and it does beg the question, who is selling at this point? It certainly wasn't Cathie Wood. She added nearly 600k shares yesterday.
Roku is now the second largest position in Wood's flagship ARKK fund behind only Tesla. There are 37 stocks in ARKK. There are valid concerns about the future solvency prospects of many of them. Do you really think she's going to be wrong about all of them? C'mon. Were her growth stocks wildly overvalued when she was crushing the rest of the market? Absolutely. Are many of them still overvalued heading into a potential hiking cycle? Probably. But as someone who has worked professionally in media for over a decade, Roku is one of the names that I think she's going to get correct when the cord-cutting story is finished.
So who is selling?
It's a valid question, in my opinion. I have an incredibly hard time believing bulls who have watched the stock fall like a knife from the $400s, $300s, and $200s are now capitulating as the stock trades at a 3 year price to sales low.
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