Netflix Ad Plan Not Enough to Halt Roku’s 78% Stock Rout
Optimism about an ad-supported subscriber tier at Netflix Inc. has recently lifted shares of the video-streaming company off multiyear lows, but that hasn't translated to Roku Inc.
Shares in the platform for streaming services on Friday closed at their lowest level since February 2019 and have lost more than three quarters of their value since the start of 2022, the 12th-biggest drop in the Russell 1000 Index. While Netflix is up 36% since the market low in mid-June, Roku has lost about the same amount since then.
Roku shares rose 4.7% on Monday, participating in a broad rally for equities. Netflix shares advanced 3.1%.
Netflix, which reports third-quarter results Tuesday, said last week it would charge subscribers $7 a month for the new ad-supported product, starting Nov. 3. The company's standard service, without ads, costs $15.49 a month in the US. The move will give Netflix a new chunk of paying subscribers, plus a revenue source, advertising, that it previously had shunned.
Roku devices allow users to manage streaming services such as Netflix and Hulu. The company sells ads for its own Roku Channel and splits some ad inventory with other services. However, even if Netflix accelerates the shift to streaming as a destination for marketers, investors are skeptical it will be a meaningful catalyst for Roku.
“There's an idea Roku could ride the coattails and see growth from ads on Netflix, but I don't think this will have much impact on them,” said Jim Worden, chief investment officer of Wealth Consulting Group, which owns Netflix and Walt Disney Co. but sees the headwinds facing Roku as too severe for the stock to be attractive.
“Even though it is trading well below where it was, it isn't a screaming buy. This is a difficult
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