Why Roku's Latest Rally Isn't Likely to Last
Roku (NASDAQ: ROKU) shares have been climbing again since the stock went over a cliff back in late September. It's getting close to its 52-week high, and the danger for investors is that the stock could be headed for yet another correction. The stock is back to being heavily overvalued, and investors buying anything that's priced at nearly 40 times book value are going to be taking a big risk by doing so.
A few weeks ago, Roku released its Q3 results, which showed revenue of $261 million, coming in higher than the $256.9 million expected by analysts. It also raised its full-year guidance, projecting sales to hit $1.11 billion. That would be good enough for a year-over-year growth rate of 50% from the $743 million that Roku generated in sales in 2018. The problem for investors is that the company continues to pile on the losses.
With a net loss of $25.2 million in Q3, Roku incurred a loss that was nearly as big as all three previous quarters combined, which totaled $25.8 million. A significant increase in operating expenses was behind the poor results.
Source Fool.com
