The Stock Market Drops, And There May Still Be More To Come

S&P 500 (SPY)

Stocks finished February 21 lower by about 35 bps. The good news about yesterday’s trading session is that the S&P 500 finished off its lows. The bad news is that now there is a downtrend in the index. Again, I continue to believe that the S&P 500 is heading towards the gap at 2,753.

spy, S&P 500


Additionally, the NASDAQ also fell today but managed to find some support around 7,430. Again like the S&P 500, there is now a downtrend in the index. A drop below support sends the index lower towards 7,300. 

nasdaq, ixic


Interestingly the VIX is bouncing up against resistance at 15.25. A rise above resistance triggers the sell-off in equities and an increase in the VIX to around 17.25.


Everything continues to point to equity prices that are likely to continue to fall over the next few days. My thought process has been and still is that this a one or two-day event, with the indexes refilling the gaps. Can it extend beyond that? It could, although that is not what I am thinking about now, nor do I want to see happen. Let’s see what happens now.


Roku’s results look ok. The first quarter guidance is just a hair shy of estimates at $187.5 million at the mid-point versus estimates of $188.75. Full-year revenue guidance was strong at $1.0125 billion at the mid-point versus estimates of $981.7 million.

If one must nit-pick, I would continue to point to the slowing ARPU despite increasing streaming hours. It just tells us that more time streaming time doesn’t translate to faster revenue growth.


The one thing that has always bothered me about the company is how Roku calculates their ARPU, which is very different from how others may calculate ARPU, like Facebook.  Have you looked at how Roku calculates ARPU? Check it out. 

Here is Facebook:

I have just never seen a company track ARPU the Roku way. Basically you take the sum of the last four quarter platform revenue, in this case $416.9 million. Then you average the fourth quarter 2018 active users which is 27.1 with the fourth quarter 2017 active users of 19.3, which equals 23.2. That is how you get the ARPU of $17.95.

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Disclosure: Michael Kramer and the clients of Mott Capital own GOOGL and NFLX

Disclaimer: This article is my opinion and expresses my views. Those views can change at a moment's notice when ...

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