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Why Is Roku (ROKU) Up 15.3% Since Last Earnings Report?
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A month has gone by since the last earnings report for Roku (ROKU - Free Report) . Shares have added about 15.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Roku due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
ROKU's Q3 Loss Narrower Than Expected, Revenues Increase Y/Y
Roku reported third-quarter 2022 loss of 88 cents per share, narrower than the Zacks Consensus Estimate of a loss of $1.37. The company had reported earnings of 48 cents per share in the year-ago quarter.
Revenues increased 12% from the year-ago quarter’s level to $761.4 million and beat the consensus mark by 8.93%.
Growth of the Roku Channel’s reach and engagement drove third-quarter performance.
In third-quarter 2022, the company added 2.3 million incremental active accounts to reach 65.4 million. This growth was driven primarily by TV sales in both U.S. and international markets, along with improved active account retention.
Streaming hours were 21.9 billion hours, up 1.1 billion hours from the second quarter.
The average revenue per user rose 10% from the prior-year quarter’s levels to $44.25 (on a trailing 12-month basis).
For the third consecutive quarter, the Roku Channel was among the top five channels by both active account reach and streaming hour engagement on the Roku platform in the United States. The Roku Channel also ranked first in reach among AVOD/FAST services in the United States and Canada, according to TiVo’s most recent quarterly Video Trends Report.
Quarter Details
Platform revenues (88.1% of revenues) increased 15.1% year over year to $670.4 million. This growth was lower than historical growth rates as many marketers abruptly curtailed or paused advertising spend in the ad scatter market.
Player revenues (11.9% of revenues) declined 6.6% from the year-ago quarter’s level to $91 million.
Operating Details
Gross margin, as a percentage of total revenues, contracted 670 basis points (bps) from the year-ago quarter’s level to 46.9%.
Operating expenses increased 70.7% year over year to $503.8 million. As a percentage of total revenues, the metric expanded to 66.2% from 43.4% in the year-ago quarter.
As a percentage of total revenues, research & development expenses expanded 960 bps year over year, while sales & marketing and general & administrative expenses expanded 1140 bps and 180 bps, respectively, on a year-over-year basis.
In the third quarter, negative adjusted EBITDA was $34.4 million compared with $130.1 million in the year-ago quarter.
Operating income was $27.9 million in the reported quarter against operating income of $0.5 million in the year-ago quarter.
Balance Sheet
As of Sep 30, 2022, cash and cash equivalents were $2.01 billion compared with $2.05 billion as of Jun 30, 2022.
As of Sep 30, 2022, Roku had total debt of $82.4 million compared with $84.9 million on Jun 30, 2022.
Guidance
For fourth-quarter 2022, Roku expects total net revenues of $800 million, total gross profit of roughly $325 million and adjusted EBITDA of negative $135 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -38.57% due to these changes.
VGM Scores
Currently, Roku has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Roku has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Roku belongs to the Zacks Broadcast Radio and Television industry. Another stock from the same industry, Sirius XM (SIRI - Free Report) , has gained 5.3% over the past month. More than a month has passed since the company reported results for the quarter ended September 2022.
Sirius XM reported revenues of $2.28 billion in the last reported quarter, representing a year-over-year change of +3.7%. EPS of $0.07 for the same period compares with $0.08 a year ago.
For the current quarter, Sirius XM is expected to post earnings of $0.09 per share, indicating a change of +12.5% from the year-ago quarter. The Zacks Consensus Estimate has changed +3% over the last 30 days.
Sirius XM has a Zacks Rank #4 (Sell) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.
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Why Is Roku (ROKU) Up 15.3% Since Last Earnings Report?
A month has gone by since the last earnings report for Roku (ROKU - Free Report) . Shares have added about 15.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Roku due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
ROKU's Q3 Loss Narrower Than Expected, Revenues Increase Y/Y
Roku reported third-quarter 2022 loss of 88 cents per share, narrower than the Zacks Consensus Estimate of a loss of $1.37. The company had reported earnings of 48 cents per share in the year-ago quarter.
Revenues increased 12% from the year-ago quarter’s level to $761.4 million and beat the consensus mark by 8.93%.
Growth of the Roku Channel’s reach and engagement drove third-quarter performance.
In third-quarter 2022, the company added 2.3 million incremental active accounts to reach 65.4 million. This growth was driven primarily by TV sales in both U.S. and international markets, along with improved active account retention.
Streaming hours were 21.9 billion hours, up 1.1 billion hours from the second quarter.
The average revenue per user rose 10% from the prior-year quarter’s levels to $44.25 (on a trailing 12-month basis).
For the third consecutive quarter, the Roku Channel was among the top five channels by both active account reach and streaming hour engagement on the Roku platform in the United States. The Roku Channel also ranked first in reach among AVOD/FAST services in the United States and Canada, according to TiVo’s most recent quarterly Video Trends Report.
Quarter Details
Platform revenues (88.1% of revenues) increased 15.1% year over year to $670.4 million. This growth was lower than historical growth rates as many marketers abruptly curtailed or paused advertising spend in the ad scatter market.
Player revenues (11.9% of revenues) declined 6.6% from the year-ago quarter’s level to $91 million.
Operating Details
Gross margin, as a percentage of total revenues, contracted 670 basis points (bps) from the year-ago quarter’s level to 46.9%.
Operating expenses increased 70.7% year over year to $503.8 million. As a percentage of total revenues, the metric expanded to 66.2% from 43.4% in the year-ago quarter.
As a percentage of total revenues, research & development expenses expanded 960 bps year over year, while sales & marketing and general & administrative expenses expanded 1140 bps and 180 bps, respectively, on a year-over-year basis.
In the third quarter, negative adjusted EBITDA was $34.4 million compared with $130.1 million in the year-ago quarter.
Operating income was $27.9 million in the reported quarter against operating income of $0.5 million in the year-ago quarter.
Balance Sheet
As of Sep 30, 2022, cash and cash equivalents were $2.01 billion compared with $2.05 billion as of Jun 30, 2022.
As of Sep 30, 2022, Roku had total debt of $82.4 million compared with $84.9 million on Jun 30, 2022.
Guidance
For fourth-quarter 2022, Roku expects total net revenues of $800 million, total gross profit of roughly $325 million and adjusted EBITDA of negative $135 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -38.57% due to these changes.
VGM Scores
Currently, Roku has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Roku has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Roku belongs to the Zacks Broadcast Radio and Television industry. Another stock from the same industry, Sirius XM (SIRI - Free Report) , has gained 5.3% over the past month. More than a month has passed since the company reported results for the quarter ended September 2022.
Sirius XM reported revenues of $2.28 billion in the last reported quarter, representing a year-over-year change of +3.7%. EPS of $0.07 for the same period compares with $0.08 a year ago.
For the current quarter, Sirius XM is expected to post earnings of $0.09 per share, indicating a change of +12.5% from the year-ago quarter. The Zacks Consensus Estimate has changed +3% over the last 30 days.
Sirius XM has a Zacks Rank #4 (Sell) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.