Why Roku, Inc. Shares Plunged 23% Lower in October

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What happened

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Shares of Roku (NASDAQ: ROKU) fell 23.2% lower in October 2017, according to data from S&P Global Market Intelligence. Having started its life on the public markets at the very end of September, the young stock had some volatility to shake out of its system.

So what

The maker of streaming video set-top boxes and operator of related advertising services took a heavy hit in early October, when the freshly minted ticker opened up for options trading and short-selling. The bearish action stabilized for a while, but when the banks underwriting Roku's stock offering exited their lock-up period, the flurry of new analyst ratings were a mixed bag. Therefore, share prices had some more sliding to do.

Now what

Now, Roku published its first public earnings report on the evening of Wednesday, Nov. 8 -- and it was a doozy. Top-line sales jumped 40% higher year over year and gross profits nearly doubled. Adjusted net losses stopped at $0.10 per share on revenue of $125 million. Analysts were taken by surprise, having placed their bets closer to a loss of $1.30 per share on sales of $110 million.

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Roku shares closed 55% higher the next day, erasing October's entire haircut and then some. Analysts and investors alike have some catching up to do here, and it could take a while before Roku's business model and stock is widely understood.

If you'll excuse me, I've got some financial filings to read. This stock deserves a deeper dive.

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Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.