Roku Stock Vs. Netflix: The Outlook For Earnings And The Pandemic

What will renewed fears of Covid-19 mean for streaming leaders Roku (ROKU) and Netflix (NFLX)? Both ROKU stock and NFLX stock are building new bases as expectations for second-quarter earnings remain strong.


After announcing the launch of Roku Originals in April, Roku added 30 original series to the Roku Channel in May. The lineup includes major talent such as Kevin Hart, Anna Kendrick and Jennifer Lopez.

Roku expects to release an additional 45 Roku Originals this year to complement the Roku Channel’s expansive library of over 40,000 free movies and television programs and more than 190 live linear channels already offered to viewers. Live linear TV programming is a stream that runs all day, like a traditional TV channel.

The Roku Channel reaches U.S. households with an estimated 70 million people, according to first-quarter figures.

Roku Vs. Netflix

Both Roku and Netflix pioneered the streaming of content to TVs and mobile devices. In fact, Roku began life as a unit of Netflix, making the company’s first set-top box. But wanting to be hardware agnostic, Netflix divested the business in 2007.

Today, Roku-branded streaming players and TV-related audio devices are available in the U.S. and in select countries through direct retail sales and licensing arrangements. Roku TV models are available through licensing arrangements with TV OEM brands.

In March, Roku launched its Brand Studio to help marketers go beyond the traditional 30-second TV ad spot through advertiser-commissioned short and midform TV programs, interactive video ads and other branded content on the Roku Channel.

Both Roku and Netflix hail from the movies and related leisure industry group. With an 88 Composite Rating, Roku stock leads the group. Netflix stock comes in at No. 2 with an 81 rating.

While neither made the latest list of new buys by the best mutual funds, both stocks have solid institutional support. Roku stock sports a B+ Accumulation/Distribution Rating and a 1.5 up/down volume ratio. Netflix scores a B- and 1.6 for the two metrics.

Demand for both stocks is strong among top money managers, with 326 A+ funds owning shares in Netflix and 191 taking a stake in Roku.

Netflix, which reportedly plans to add video games to its subscription service, reports first quarter earnings on July 20. Analysts expect 100% EPS growth, following a 139% increase last quarter.

After delivering 220% earnings growth in Q1, analysts see Roku posting a 134% EPS gain when it reports second-quarter numbers on Aug. 5.

Will Roku Stock And Netflix Stock Both Stream Into Buy Zone?

With earnings due first among the two streaming leaders, Netflix stock has been moving essentially sideways for a year. The current chart pattern is a second-stage double bottom showing a 563.66 buy point.

Working on a cup with handle, Roku stock is approaching a 463.09 entry. It’s a first-stage but deep base, with a 44% decline within the pattern. But that comes after a sharp 736% rise following the coronavirus crash in March 2020.

After hope for a fully reopened economy and a return to normalcy, people now fear the Covid-19 variants and a resurgence in the pandemic. This may signal a return to stay-at-home trends and binge-watching from the couch rather than heading back into the theaters.

The initial pandemic drove big gains for Netflix and Roku. Now we’ll see how Wall Street reacts first to earnings from Netflix then from Roku — and what the changing pandemic environment will mean for both stocks.

Follow Matthew Galgani on Twitter at @IBD_MGalgani.


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