Cathie Wood’s ARKK Slips on Roku Downgrade

Shares of the ETF dropped as much as 3% during morning trading.

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Reviewed by: Shubham Saharan
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Edited by: Shubham Saharan

Cathie Wood’s ARKK Innovation ETF (ARKK) slipped again as shares of Roku Inc., known for its television streaming services, plummeted after reporting lackluster quarterly earnings. 

Roku, ARKK’s third-largest holding, dropped more than 15% in early trading. It comprises 6.8% of ARKK’s portfolio, or $495.3 million as of Sept. 30, according to company filings. ARKK shares fell as much as 3% on the news.  

The digital media company cut its fourth-quarter revenue guidance and predicted economic conditions could further “degrade advertising budgets.”  

“We believe in the long-term opportunity for CTV and see Roku’s active account base and operating assets as valuable,” Michael Morris, equity research analyst at Guggenheim Securities, said in a note to clients on Thursday in reference to the company’s CTV offering, which streams TV. “However, we struggle to value the business given the lack of detail from the company and the warning indicators.” 

Roku’s poor performance is just the latest hurdle for Wood’s ARKK, which has dropped more than 62.4% year to date, after soaring 153% in 2020. The fund has drastically underperformed broader markets, including the SPDR S&P 500 ETF Trust (SPY) and the Invesco QQQ Trust (QQQ).  

The firm also announced it was shuttering its Transparency ETF (CTRU) following the closure of its underlying index, at the end of July. Its eight remaining ETFs, including ARKK, have also shown lackluster returns.  

A spokesperson for ARKK was not immediately available for comment.  

Almost one-third of ARKK comprises tech-focused companies, a sector that has struggled in recent months, battling declining advertising revenues and repatriation costs. Shares of big-tech names, like Amazon.com, Alphabet Inc. and Meta Platform Inc., have dropped in recent weeks.  

“It’s a moment of truth for tech earnings,” said Dan Ives, managing director of equity research at Wedbush Securities and partner in the Wedbush ETFMG Global Cloud Technology ETF (IVES), in an interview with ETF.com. 

 

Contact Shubham Saharanat[email protected]

Shubham Saharan is a markets reporter at etf.com. Before joining the company, she reported for Bloomberg and the Financial Times. Saharan is a graduate of Barnard College of Columbia University.