Roku’s 18% Spike Boosts Wood’s ARK Innovation ETF

Roku Inc. shares surged Thursday after the streaming platform’s fourth-quarter earnings beat Wall Street’s expectations, boosting Cathie Wood’s ARK Innovation ETF (ARKK), which last year was hurt by its investment in the company. 

Roku added 18% in afternoon trading after yesterday laying out for investors a path to achieving profitability and reporting subscriber additions. That helped ARKK stay in positive territory on a day when the tech-heavy Invesco QQQ Trust (QQQ) dropped. Roku also said users spent more time streaming last fall, and advertising revenue saw improvements. 

Roku's revenue beat and plans to rein in expense growth seemed to please analysts, validating the massive bet Wood placed on the firm—now valued at $575.6 million, according to the company. 

Roku is ARKK’s third largest holding, consisting of 8.92 million shares or 7% of its assets. With a total net asset value of $7.65 billion, ARKK’S top holding is Tesla Inc., at 10.4%, while Zoom Video Communications is its second largest asset, at 8.2%. 

ARKK’s 28% gain so far this year is helping erase investors’ worries after the much-heralded fund sunk 40% in 2022.  

“Cathie Wood's ARK Innovation ETF is in a league of its own this year,” Investors.com writer Matt Krantz posted on Twitter after the Roku earnings report. 

Roku has been a mercurial holding for ARKK. On Nov. 3, ARKK dropped 3% following a 15% decline in Roku after the company cut its fourth-quarter revenue guidance and predicted economic conditions could further “degrade advertising budgets.”  

ARKK is the largest holder of Roku among the 101 ETFs that own the stock, with 24.2 million shares being held in ETFs alone, according to ETF.com data. 

Roku reported fourth-quarter revenue of $867.1 million, which beat the $803 million expected by The Street.com. The company’s loss of $1.70 per share was lower than the expected $1.72 per share, according to FactSet. 

The company said its customers streamed a record 23.9 billion hours during the fourth quarter, an increase from 21.9 billion hours in the prior quarter.  

New customer additions of 4.6 million easily surpassed estimates of 3 million. 

The company also estimated its first-quarter revenue to reach $700 million, which is also higher than analysts' estimates. 

The average U.S. ETF portfolio allocates 0.42% to Roku, while the stock remains a favorite for both active and vanilla ETFs.  

Contact Ellen Chang at [email protected]