Roku, Robinhood, Inflation and IBM - 5 Things You Must Know Friday

Stock futures suggest the S&P 500 could put an end to a three-day losing streak; Roku posts a surprise fourth-quarter profit; Robinhood CEO takes the heat at the GameStop hearing; IBM exploring sale of Watson Health unit.
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Here are five things you must know for Friday, Feb. 19:

1. -- Stock Futures Suggest a Higher Wall Street Open

Stock futures Friday suggested the S&P 500 would put an end to a three-day losing streak as investors put aside fears that an increase in borrowing costs could stall a recovery of the U.S. economy. 

Contracts linked to the Dow Jones Industrial Average rose 112 points, S&P 500 futures gained 18 points and Nasdaq futures rose 77 points.

Stocks closed lower Thursday as bond yields resumed their climb, jobless claims increased more than expected and earnings from retail giant Walmart  (WMT) - Get Report disappointed.

The yield on the 10-year Treasury was at 1.301% early Friday and its steady rise this week has been stoking concerns about inflation.

However, the jump in yields also can be viewed as a sign that investors expect the economy to improve.

Stocks have gotten a boost over the past six months on optimism over the development and rollout of coronavirus vaccines. Equities also have been buoyed by expectations that President Joe Biden’s $1.9 trillion stimulus plan will be passed.

Treasury Secretary Janet Yellen told CNBC Thursday that a large stimulus package was necessary to get the economy - which she said was in a "deep hole" - back to full strength.

Yellen also said she wasn't concerned that increased government spending would push inflation higher.

2. -- Roku Posts Surprise Profit, Sees First-Quarter Revenue Above Estimates

Roku  (ROKU) - Get Report was rising in premarket trading Friday after posting a surprise fourth-quarter profit and predicting that first-quarter revenue would top analysts' estimates.

Earnings in the fourth quarter were 49 cents a share, up from a year-earlier loss of 13 cents a share. Analysts had been expecting the video-streaming platform company to post a loss of 5 cents a share.

Revenue in the period increased to $649.9 million, higher than $411 million a year earlier and above analysts' calls of $619 million. 

For the first quarter, Roku said it expects revenue of $478 million to $493 million and a loss of $16 million to $23 million. Analysts predict revenue of $463 million and a loss of $52 million.

Roku warned, however, that revenue growth could slow in the second half of the year.

In the second half of the year, Roku anticipates "much tougher comparisons thanks to our exceptional performance in 2H20, and Q3 in particular, as consumer interest in streaming surged and our monetization efforts rebounded from slower Q2 growth levels," said CEO Anthony Wood. "Thus, for the full year, our overall year-over-year revenue growth will fall below levels we expect to see in the first and second quarters of 2021."

The stock rose 2.11% to $462.55 in premarket trading Friday.

3. -- Robinhood CEO Takes the Heat at GameStop Hearing

The CEO of online trading app Robinhood took most of the heat from lawmakers who on Thursday grilled Vlad Tenev on his company's role in the recent trading frenzy surrounding the stock of video game retailer GameStop  (GME) - Get Report and other heavily shorted stocks.

Many of those participating in last month's trading mania used the Robinhood platform, which makes it easy for young and inexperienced traders to gain access to markets.

GameStop rose more than 1,700% from Jan. 1 through Jan. 27. At the height of the frenzy, Robinhood slapped limits on its customers' ability to buy the stock, leading to more wild trading swings and accusations the platform was trying to help hedge funds who were short the stock.

Tenev said his company had to impose the limits. 

"Robinhood Securities [its clearing broker] put the restrictions in place in an effort to meet the increased regulatory deposit requirements, not to help hedge funds," said Tenev in his opening testimony before a hearing of the House Financial Services Committee.

"We don't answer to hedge funds. Robinhood immediately secured additional funds altogether through capital raising and other measures. We increased our liquidity by more than $3 billion to cushion ourselves against increased collateral requirements and related market stress in the future," he added.

Tenev admitted during the hearing that his company came up short during the GameStop saga. 

“I’m sorry for what happened,” he said. “I’m not going to say that Robinhood did everything perfect and that we haven’t made mistakes in the past. But what I commit to is making sure that we improve from this.”

TheStreet's Jim Cramer wrote about what his expectations were for the GameStop hearing.

4. -- Friday's Calendar: Deere Earnings, Existing Home Sales

Deere  (DE) - Get Report was up 5% premarket trading Friday after fiscal first-quarter earnings and revenue easily topped Wall Street forecasts.

Earnings are also expected Friday from MoneyGram International  (MGI) - Get Report, DTE Energy  (DTE) - Get Report and Portland General Electric  (POR) - Get Report.

The U.S. economic calendar for Friday includes the PMI Composite Flash for February at 9:45 a.m. ET and Existing Home Sales for January at 10 a.m.

5. -- IBM Exploring Sale of IBM Watson Health Division

International Business Machines  (IBM) - Get Report has been exploring the sale of unprofitable IBM Watson Health division, The Wall Street Journal reported, citing people familiar with the matter.

IBM has been studying alternatives for the unit that could include a sale to a private-equity firm or industry player or a merger with a blank-check company, the people told the Journal. The unit, which uses artificial intelligence to help manage and analyze health data ranging from mammograms and MRIs to patient communications, has roughly $1 billion in annual revenue.

The company has fallen behind rivals Amazon.com (AMZN) - Get Report, and Microsoft (MSFT) - Get Report in the move to cloud-computing, the Journal noted. 

IBM CEO Arvind Krishna, who took over the top post in April, has been pursuing efforts to streamline the company’s operations and gain traction amid the ongoing shift by companies and organizations to cloud-based computing. 

IBM shares were rising 0.34% in premarket trading to $121.14.