Roku Stock Poised for Dramatic 17% Price Fluctuation Following Earnings

According to the options market, Roku Inc. (ROKU) is gearing up for a turbulent trading session after releasing its quarterly earnings post-market close on Wednesday. Options expiring on May 18 suggest an anticipated price swing of around 17%, signaling heightened volatility compared to Amazon’s 10% and AMD’s 14% expected moves during their earnings seasons.

Back in 2017, Roku’s shares were among the market’s hottest, surging nearly 400% from the IPO price of $14 to a peak near $56 in mid-December. However, since then, the stock has retreated by almost 40%. The sharp decline followed Roku’s Q4 2017 earnings announcement on February 21, where first-quarter revenue guidance fell short of analysts’ expectations. Since that report, shares have dropped by 34%.

Data provided by YCharts

Significant Price Volatility Anticipated

Following its last earnings release, Roku’s shares plunged nearly 18%, intensifying the stock’s inherent volatility. This explains why options traders are pricing in such a substantial move ahead of Wednesday’s results. The long straddle strategy for May 18 expiration implies a price move of approximately 17.5% from the $33.50 strike, projecting a trading range between $27.80 and $39.20, relative to the current price near $33.60.

The implied volatility for these options stands at nearly 123%, which is roughly 9.5 times greater than the S&P 500’s implied volatility of 13%. This suggests Roku could experience a one standard deviation price change of 20%, exceeding the move indicated by the options market. Clearly, investors are bracing for a significant price shift.

Analyst Projections

Analysts forecast Roku’s first-quarter revenue to rise 27.5% year-over-year to $127.55 million, compared to $100.09 million last year, while expecting a loss of $0.16 per share. Equally critical will be the company’s update on active user accounts, which reached 19.3 million at the end of Q4, and the average revenue per user (ARPU) of $13.78.

What’s Next?

Guidance for the second quarter will heavily influence Roku’s stock trajectory post-earnings. Analysts anticipate revenue growth to $135.63 million, with a projected loss of $0.15 per share.

Revenue estimates data courtesy of YCharts

Regardless of the earnings outcome, Roku’s stock is expected to experience substantial price swings, underscoring the high-stakes nature of the upcoming report.

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