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Shares of Roku Inc. ROKU, +4.42% were up 2.2% in premarket trading Tuesday after Susquehanna analyst Shyam Patil began coverage of the stock with a positive rating and $80 target price. Roku's operating system "is purpose built for low-cost TV hardware, while its competitors have largely repurposed operating systems from phones and tablets, and this matters as TV profit margins are razor thin and the hardware in TVs is not nearly as sophisticated as mobile devices," he wrote. "Second, Roku is unbiased with the content it allows on its platform, and this is important as the apps from the top 4 players all have at least ~30% reach of total over-the-top households." He sees the connected-TV ad market inflecting and called Roku one of the top ways to play this trend. "In all, we see Roku as a 30%+ top-line grower with upside potential and a clear path to sustainable profitability," Patil wrote. Roku's stock has gained 90% so far this year, as the S&P 500 SPX, +0.02% has risen 16%.
Shares of Roku (NASDAQ: ROKU) catapulted higher to start the year, with Roku stock rising from under $30 in late 2018, to above $70 by March 2019. The catalyst? A robust beat-and-raise holiday quarter earnings report which put to rest competition concerns, and underscored that Roku remains the unchallenged, runaway leader in the SVOD (streaming video on demand) aggregation market. But, this rally has run into some resistance lately, as competition concerns have once again reared their ugly head. Specifically, Apple (NASDAQ: AAPL) just launched its TV and TV+ apps, while Amazon (NASDAQ: AMZN) is reportedly investing millions into expanding its arsenal of ad-supported streaming channels.
Both of those developments theoretically pose competitive risks to Roku, and investors are freaking out. Consequently, the stock has fallen sharply over the past few weeks.
The steep fall in Roku is actually a welcome sign for bulls. Next up for Roku? First quarter earnings, due in early May. Those numbers will likely be pretty good, given multiple operational catalysts on both the consumer and ad tech fronts. With the stock now well off its early 2019 highs, those good numbers should be enough to spark a rally in Roku.
That’s why I’m bullish on ROKU this earnings season. A few weeks ago, this stock was fully valued, and even the best numbers likely wouldn’t have sparked a rally. Now, though, the stock is much more reasonably valued, and technically beaten up. Against that backdrop, good numbers should spark a healthy rally.
Roku ( ROKU) reported its Q1 2019 financial results on Wednesday beating analysts’ expectations. The streaming device maker reported $207 million in revenue versus analysts’ estimates of $190 million.
The company saw losses per share of $0.09. Analysts estimated the company would see losses of $0.26 per share. The stock was up 6% in aftermarket trading.
Roku is known for producing its streaming devices like the Roku Streaming Stick and partnerships with its Roku TV line. Increasingly, however, the company is leaning on advertising to grow its revenue via in channel ads, display ads and its free Roku Channel.
Roku is saw its active user accounts grow 40% year-over-year, while total streaming hours ballooned by 74% to 8.9 million hours in the quarter.
The company’s ad sales business recorded revenue of $134 million, a jump of 79% year-over-year, while device sales rose by 18% year-over-year.
Roku previously announced that it anticipates it will see revenue of $1 billion by the end of 2019.
The streaming video market is going through a period of rapid expansion with Apple ( AAPL) and Disney ( DIS) both expected to launch their own paid services later this year.
Both companies have confirmed that they will offer their properties on Roku’s devices, but the added viewing options for users means increased competition for Roku’s free Roku Channel, which could cut into the company’s hopes of building advertising revenue.
Roku had an outstanding first quarter, delivering better-than-expected financial results with strong business momentum. As a result, we are increasing our financial outlook for 2019. The strength of our brand, the scale of our active account base, the advantages of our purpose-built streaming OS, and the engagement of our users make Roku an increasingly important partner for content publishers, advertisers and TV manufacturers. The shift to streaming and away from linear TV and legacy distribution platforms has enormous momentum. We estimate that in Q1 2019 more than one-in-three smart TVs sold in the U.S. were Roku TVs, making the Roku OS the #1 selling smart TV OS in the U.S.
A few Q1 2019 highlights:Total net revenue grew 51% YoY to $206.7 million;
Platform revenue increased 79% YoY to $134.2 million;•Gross profit rose 60% YoY to $100.9 million;
Active accounts were up 2.0 million incrementally vs. Q4 2018 to 29.1 million;
Streaming hours increased 1.6 billion hours vs. Q4 2018 to 8.9 billion;
Average Revenue Per User (ARPU) was $19.06 on a TTM basis, up $1.11 vs. Q4, and up 27% YoY;
Roku monetized video ad impressions again more than doubled YoY in the quarter.
Roku Stock Is Soaring Because It’s Trouncing Tech Giants Like Apple and Amazon
Roku stock was up 23% Thursday as Wall Street gushed about the company’s soaring number of users and growing advertising revenue.
Roku (ticker: ROKU) is now the No. 1 smart TV system in the world, the company announced. More than one in three TVs sold in the U.S. in the first quarter used its operating system. That’s up from one in four a year ago. Given trends in TV sales, there’s reason to believe that Roku could increase its share even more.