Roku (NASDAQ: ROKU) stock price continued its freefall as concerns about the company’s growth and profitability remained. It has already formed a death cross pattern and moved to its lowest swing since October last year. It is down by almost 50% from its highest point this year.

Roku is a leading disruptor in the television industry, where it has amassed a leading market share in the streaming sector. It has gained over 80 million users globally even as it faces strong competition from the likes of Apple, Google, and Amazon.

Roku’s business model is relatively simple: sell its device at a loss and then generate revenue in perpetuity by monetizing it. In the most recent results, the company said that its devices revenue rose to $126 million while its gross loss stood at over $6.7 million.

Roku’s platform revenue has been in a strong uptrend in the past few years. It rose to over $754 million last quarter from $634 million a year earlier. In all, the company had over $881 million in revenue and a net loss of $50 million. 

There are two main concerns for Roku. First, investors are concerned about its market share as competition rises. I also believe that the company has limited chances of growing its device sales in the future. 

Second, there are concerns about its advertisement business as competition remains stiff. And finally, the company’s lack of profitability is a big issue. Analysts expect that the company will lose 49 cents per share in Q2 followed by 45 cents in the next one.

For the year, the company is expected to lose $1.97 per share followed by $1.2 in 2025. Keep in mind that Roku has struggled to achieve profitability in the past few years. Its only annual profit came in at $242 million in 2021 followed by $498 million and $798 million in the next two years.

To be clear: Roku still maintains a market share of over 53% in the streaming industry and its subscription and advertisement business is still gaining some market share. The challenge is whether the company can maintain its past growth.

ROKU chart by TradingView

The weekly chart shows that the ROKU share price formed a triple-top pattern around $98 between July and March this year. In most cases, a triple-top pattern is usually followed by a bearish breakout. It has already crashed below the neckline of this pattern at $56.90.

The stock has also remained below the 50-week and 25-week Exponential Moving Averages (EMA). The two have made a bearish crossover while the Relative Strength Index (RSI) is nearing the oversold level, signaling that it has downward momentum. 

Therefore, the outlook for the stock is extremely bearish, with the next point to watch being at $38.40, its lowest point in 2023.

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