And if you don’t think the markets are getting ugly, you should see the intra-day volatile price action of some of the more well-known stocks. I continue to be amazed at the INSANE price movements taking place in the various stocks in the market. While the fundamentals haven’t played much of a role in determining the “PRICE” of stocks for a while, it seems to me that there is no rhyme or reason for the way the stocks are trading today.
So, before I compare the analysis of the overall markets versus the precious metals, I wanted to provide two examples of company stock price movements over the past two days and why investors today are TOTALLY INSANE and IRRATIONAL.
ROKU Stock Jumps 28% In One Day On Lousy Financials
Those who aren’t familiar with the company called ROKU, they are one of the new streaming content providers to compete with Cable and Satellite. It seems as if many cable and satellite customers are growing tired of the high costs of $150-$200 a month for their TV entertainment, so they are replacing them with ROKU via YouTube TV, Hulu, Netflix, etc.
On Thursday, ROKU came out with their Q1 2019 earnings, and according to several analysts, it was a BLOCKBUSTER quarter. I watched that day as ROKU started trading $5 higher before the market opened, and then shot up another $13 by the end of the day:
In just one day, not only did ROKU’s stock rally by more than $18, it’s market cap also increased $2.1 billion. How many stocks go up 28% in a day? Well, I don’t remember XEROX ever going up 28% in a single day in the 1980s, 1990s, or 2000s. I haven’t look at XEROX’s stock that closely, but even during the massive tech boom in the late 1990s, I didn’t see any $18 single day moves in XEROX.
Regardless, some of the analysts stated that ROKU’s huge stock move that day was due to a “BLOCKBUSTER” and “FLAWLESS” quarter:
Roku Soars to All-Time High on Blockbuster Earnings
Roku stock soars more than 20% after ‘flawless quarter’ and big subscription opportunity
As I watched in disbelief how a stock could go up 28% in one day just on earnings, I decided to read the analysts’ articles and the company’s Q1 2019 report. The first “supposed” analyst stated that ROKU’s stock jumped due to “Blockbuster Earnings.” For those who don’t read many financial reports, earnings represent the company’s profit or loss.
Well, according to ROKU’s Q1 2019 financial statement, the company lost $10.7 million in the quarter, shown in the red highlighted area. However, the analysts stated that it was LESS OF A LOSS than forecasted. Really? Give me a break. Here is ROKU’s financial statement:
Then the second analyst claims that ROKU had a flawless quarter with a big subscription opportunity. The analyst is referring to the new active accounts shown at the top in the yellow highlighted area. While ROKU did indeed add another 2 million active accounts, it was less than the 3.3 million added in Q4 2018.
Furthermore, if we look at the bottom of the financial table, you will see ROKU’s guidance for 2019. ROKU forecasts a loss of $25-30 million in Q2 2019 and $65-$75 million for the entire year. So, how is this GOOD NEWS??
While it is true that ROKU is adding a good bunch of new subscribers and their revenues are going up, but shouldn’t analysts care about PROFITS? Yes, I have heard plenty of times that investors realize a company can suffer losses for years before making a profit, but to see ROKU’s net income loss increase to $65-$75 million, up from the $0.6 million loss in 2018, doesn’t seem like grounds for a 28% increase in the stock price...
- Source, SRS Rocco
