By Emily Bary
Some shorts are selling into the big rally, betting on an 'inevitable' pullback later in the day: analyst
Roku Inc. short sellers saw their mark-to-market losses steepen Thursday after the streaming company delivered a better-than-expected earnings report, but some shorts are doubling down.
Though shares of Roku (ROKU) are up nearly 23% in midday trading, some are betting on an "inevitable" reversal in the stock price later in the session and adding to short positions, according to Ihor Dusaniwsky, managing director at S3 Partners, a financial technology and analytics firm.
"While there is some short covering happening, we are also seeing some short selling into the rally," Dusaniwsky told MarketWatch in an email. The rise in Roku's share price Thursday isn't due to "massive" short covering, he added, since short interest isn't particularly high for Roku.
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Currently 7.43 million Roku shares are shorted, representing 10.18% of the float, per S3 data. Short interest amounts to $483 million.
Shares shorted for Roku dropped significantly in the first quarter after reaching a high of 16.1 million in mid-January. Over the last month, the level of shares shorted has been relatively stable at 7.4 million to 7.6 million.
Shorts have gotten burned this year as Roku shares have rocketed more than 150%. Dusaniwsky said that short sellers had been down $426 million in mark-to-market losses prior the report. The jump of almost 23% on Thursday added another $106 million to their paper losses.
One bullish analyst called Roku's latest quarter "flawless" () in a note to clients Thursday, while a hold-rated analyst said that there was "not much to complain about" with Roku's numbers.
Shares have risen 121% over the past 12 months, while the S&P 500 has gained 5.6%.
-Emily Bary; 415-439-6400; AskNewswires@dowjones.com
(END) Dow Jones Newswires
May 09, 2019 12:31 ET (16:31 GMT)
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