Roku’s Fate Is Sealed After Catastrophic Bank Collapse, Here’s The Latest
Roku stocks are low following the Silicon Valley Bank failure, but they are expected to trend upward again in the near future.
If you know anything about stock trading, then you don’t need to hear from us that it’s often a volatile market to invest in, especially when it comes to tech stocks. According to the popular investing tip site, The Motley Fool, growth investor Cathie Wood (ARK Innovation ETF) made some pretty aggressive purchases on three different tech stocks: Roku, Block, and Pinterest. And the numbers are staggering; Wood purchased 97,641 shares of Roku stock, 92,165 shares of Block stock, and a whopping 133,779 shares of Pinterest after Friday’s Silicon Valley Bank failure.
It seems as if Cathy Wood is “buying the dip,” a common strategy investors use to buy assets when their prices fall in anticipation of the prices recovering after the market corrects itself. Though this may be a risky move for the growth investment icon; Roku stock has seen a nearly 50 percent decrease in value over the last year, Block is down over 30 percent, and Pinterest is only up four percent despite losing $96 million last year. It’s also worth mentioning that Wood’s flagship company, ARK Innovation EFT is down 10 percent since the beginning of the fiscal year 2023.
It’s safe to say that Woods is purchasing stocks in hopes of seeing a positive ROI, and she might even see some significant gains if her assumptions are correct. As the market currently stands, however, Roku and Block have both seen significant losses in 2022, losing $498 million and $540 million, respectively, meaning that a return on investment might take some time for the investor. Of Wood’s three purchases, Pinterest seems to be the safest bet as of now, considering the fact that Pinterest currently has a stock valuation of 37 times free cash flow and is forecast for a 27 percent earnings growth long-term.
But you know the saying, “high risk, high reward.” Let’s hope Woods has her finger on the pulse for Roku, Block, and Pinterest, and she reaps the benefits of her purchases. Things presently aren’t looking great for Roku, considering that they had $487 million (26 percent) of their cash held at Silicon Valley Bank. To make matters worse, most of that money is uninsured. Luckily for Roku, procedures are in place to recover the lost funds, but we shouldn’t hold our breath; how good is a bank’s promise to recover funds if they’re the ones who lost them in the first place?
While Roku’s fate may presently seem uncertain, the streaming company isn’t necessarily in a hopeless situation either. They still have enough cash and assets to keep them afloat throughout the fiscal year before considering something like filing for bankruptcy. And if the Silicon Valley Bank makes good on its recovery of funds, then the financial disaster they’re currently facing has a chance of correcting itself over time.
The whole market seems to be on the mend, however, and we’re seeing an overall positive trend in tech stocks; Nasdaq saw a 2.2 percent rise, and the S&P 500 is seeing a 2 percent rise as well. If you’re looking to see a return on your investment, Pinterest is probably your safest bet, but if the stars align for Roku, the reward may very well be worth the risk of investment. In other words, buying the dip could result in tremendous gains for those investing, but as of right now, the risk is quite high.
