VIDEO: Is the Bottom in for Roku?
May 13, 2021
Knox Ridley
Portfolio Manager
The last few months have been difficult for tech growth investors. In isolation, it would appear that the party is over, and the broad market is likely to follow. However, if we track where the money is flowing, it appears that the standard safe haven plays, like Staples, Utilities and Gold, are not receiving the bulk of the rotation. Instead, money is flowing into transportation stocks, industrial stocks and financials.
This does not hint at a pre-recession bear market, and instead appears to be quite bullish for a long-term advance. Furthermore, if we note the outperformance of the equal-weight S&P 500 vs. the market-cap weighted S&P 500, this trend also speaks of an economy that is primed for expansion. In other words, the weight index is more representative of a healthier economy, while the market-cap weighted index is focused in bigger names that are in strong trends.
Despite the narrative around inflation fears, or the economy priming for a post-covid world, within the context of last year’s incredible advance, this drawdown in tech growth appears to be normal given the gains we saw last year. Last year was an overreaction, and this year is an overreaction in the opposite direction. We don’t let this scare us out of quality tech companies and we believe the sell-off is providing some stellar opportunities. In fact, earnings prove tech isn’t slowing down in the face of tough covid comps.
One of those names is Roku. Beth Kindig was the first analyst to understand the ad platform story and the first to recommend the company in May of 2018. Since then, as the portfolio manager for the research site, I’ve successfully entered the stock many times, including as low as $28. Yet more importantly, I’ve also cautioned our readers when we weren’t buying for the I/O portfolio, such as when the stock was over-extended and did not have a favorable setup.
For instance, there were signs of weakness in Roku at the all-time high. We noted several times that the momentum was fading at key resistance zone and warned our subscribers. Now, with prices down as much as 36%, we are seeing the current pullback as a normal drawdown within a much larger uptrend.
Although many investors are worried about another bear market, the Nasdaq-100 (Ticker: NDX) is still following our expected path. To learn more about what we’re watching for in NDX, click here.
To find out what levels we’re watching for Roku, please see the video below.
We believe the trends that propelled Roku to new highs, OTT and connected TV ads, have more room to run, and this drawdown is providing an excellent opportunity to participate in the next leg up. These microtrends are in full effect and expanding globally, which is why we identified several buying opportunities within this correction.
You can browse Beth’s previous research here as she laid out the exact path Roku is taking nearly three years ago.
The Crucial Difference Between Roku and Netflix
Q4 Earnings Analysis for Shopify, Roku, Fiverr And Palantir
Will Roku Go Boom or Bust This Year
Roku’s Stock Price: Will There Be Another Pullback?
Roku Q3 Earnings: Choppy But Unshakeable Long-Term
Update on $ROKU – Will Roku Miss Earnings?
3 Reasons Why Roku Will Be The Next Tech Darling
Here’s Why Roku Stock Will Surpass $100 In Next Two Years
Long on Roku – Even if they Miss Q1 Earnings
More To Explore
Newsletter
Token Growth is Surging - Here Are the Beneficiaries
The reality of AI demand growth has shattered early estimates for token processing, yet expectations continue moving up and to the right. In the second installment of our token processing series, we e
AI Token Demand is Shattering Forecasts
Total annual token processing is no longer measured in billions or trillions of tokens, but in the quadrillions and beyond. As annual token processing is now tracked in units with 15 trailing zeros, i
Nvidia and Google Are Crowding TSMC’s N3 Node - Can Intel Fill the Gap?
Nvidia is moving its next-generation Rubin GPUs from 4nm to 3nm, yet Google’s latest TPUs are already on N3 and are expected to remain there. Meanwhile, a growing number of AI CPUs from Nvidia, Amazon
Intel vs TSMC: How CoWoS Packaging Constraints Could Create an Opportunity for Intel Foundry
Taiwan Semiconductor (TSMC) is the single, most important company to the AI industry. However, to compete with the incumbent, Intel does not need to beat TSMC at leading-edge manufacturing. It only ne
Big Tech’s Free Cash Flow is Turning Negative – Who's Next?
Big Tech’s AI revenue is accelerating, but free cash flow is moving sharply in the opposite direction. Across Google, Microsoft, Meta and Amazon, capex is rising much faster than operating cash flow a
Big Tech Earnings Preview: Is AI Monetization Finally Catching Up to Capex?
The most pronounced difference between 2026’s tech rally compared to rallies in the past is which companies have been left out of it. The names most associated with the AI trade have hardly participat
Nvidia, CXL, and the Battle to Improve AI Inference Economics
This is Part 2 of our two-part series on AI inference economics. In Part 1 — Why Nvidia's Next AI Battle Is About Tokens per Watt, we laid out why tokens per watt has become the defining metric for in
Why Nvidia’s Next AI Battle Is About Tokens per Watt
As hyperscalers move from building AI infrastructure to monetizing it, tokens per watt helps to reflect if revenue is scaling and if profitability is improving. Offload engines can increase tokens per
Micron Is Up 900%. Here’s Why the AI Memory Trade May Still Have Room to Run
Over the past 10 months, memory chip stocks have gone from being solid beneficiaries of the AI boom to capturing a massively outsized piece of the return pie. The inflection in Micron’s performance de
Why the S&P 500 Shrugged Off the Iran War — and What Could Finally Break the Rally
On February 28th, the U.S. went to war with Iran, and the market was handed the kind of shock it hasn't contended with for years. The conflict set off a chain reaction across the region: an ongoing su
