Why Momentum for Roku, Teledoc, and Zendesk Faded


Technology stocks that benefited from an exponential growth in users are now going the other way. Roku (NASDAQ:ROKU), a streaming supplier, posted quarterly results that failed to please investors. The stock is on a sustained downtrend.

Investors are worried that Roku’s ad-supported content will not lift revenue. Their concerns are justified. Roku needs to sustain user growth and increase the ads per content displayed. Yet the more ads it pushes to viewers, the less appealing its service is. Conversely, Youtube gradually increased its ad content. This encouraged more users to sign up for the premium subscription.

In health information services, Teledoc Health (NYSE:TDOC) is on a downward trajectory. The company merged with Livongo to strengthen its offerings. Key Livongo executives left after the deal. Investors have low confidence in Teledoc’s growth prospects. It will need to spend more time and energy on integrating Livongo, a distraction to the core business.

Zendesk (NYSE:ZEN) announced it bought Acquire Momentive in Oct. for almost $4 billion. The high price tag does not pay off until 2023. Zendesk said it will not add to its growth until 2023. It sees revenue of $3.5 billion in 2024. Shareholders are nervous that paying around one times 2024 sales is over two years of integration risks.

Avoid momentum stocks when the direction is down.