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ROKU Gears Up to Report Q4 Earnings: What's in the Cards?
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Roku (ROKU - Free Report) is set to report fourth-quarter 2020 results on Feb 18.
The company expects fourth-quarter year-over-year revenue growth in the mid-40% range while platform revenues are expected to account for roughly two-thirds of total revenues.
The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $615.8 million, indicating 49.7% growth from the year-ago quarter reported figure.
Moreover, the consensus mark for loss has remained steady at 8 cents per share in the past 30 days. The estimated figure is narrower than loss of 13 cents reported in the year-ago quarter.
The company’s earnings beat the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 42.7%.
Let’s see how things have shaped up prior to this announcement.
Investor focus will be on active accounts growth, which is an important metric for Roku. The popularity of its free, ad-supported platform, The Roku Channel is expected to have aided active accounts growth in the fourth quarter of 2020. The ability to access free and premium content on the same platform has been a huge attraction for subscribers.
In the third quarter, the company reached a mutually beneficial agreement with Comcast (CMCSA - Free Report) -owned NBCUniversal to distribute the latter’s Peacock streaming services that include collaboration around marketing, advertising, and content for The Roku Channel.
Building on that partnership, Roku launched NBC News in The Roku Channel in time for the final presidential debate, expanding the overall reach and monetization of NBC News alongside its standalone NBC News app on the Roku platform.
Moreover, Roku announced that RTE Player, the on-demand service provided by Irish broadcaster RTE, is officially available on Roku streaming devices in Ireland.
The company’s active accounts jumped 43% year over year to 46 million in third-quarter 2020. Moreover, ARPU increased 20% to $27 (on a trailing 12-month basis).
Notably, the Zacks Consensus Estimate for fourth-quarter active accounts and ARPU is pegged at $50 million and $27.44, respectively, indicating an increase of 35.5% and 18.6% from the year-ago reported figures.
The expected solid surge in active accounts and viewing may have been the result of growth in subscription signups, movie rentals and purchases as well as elevated revenues from increased device sales.
Additionally, streaming hours growth is expected to have boosted TV streaming advertising on Roku’s platform. The consensus mark for streaming hours stands at 16.9 billion, implying an increase of 44.4% from the year-ago quarter’s reported figure.
In the fourth quarter, Roku announced a slate of releases on The Roku Channel in the United Kingdom including films such as The Devils Double, Muriel’s Wedding, Harry Price: Ghost Hunter and family friendly Christmas picks like Diana Show, Ryan’s World and crime-drama Little Miracles, which are expected to have boosted streaming hours in the to-be reported quarter.
The addition of Peloton app, Peloton Interactive’s virtual fitness platform for Roku streamers is also expected to have aided growth in streaming hours.
Further, the launch of streaming services — Apple TV+ and Disney+ — on Roku’s platform is expected to have aided Platform revenues, which accounted for 70.7% of revenues in the third quarter.
The consensus mark for Platform revenues is pegged at $402 million, indicating growth of 54.6% from the figure reported in the year-ago quarter.
Improving Advertising Business to Aid Top-Line
Moreover, the growing popularity of The Roku Channel is expected to have attracted advertisers in the to-be-reported quarter. Also, the acquisition of Dataxu (a demand-side advertising platform) is expected to have strengthened the company’s OTT advertising roadmap.
Meanwhile, the advertising business is expected to have witnessed delayed starts in video ad campaign, primarily from categories including travel, quick-serve restaurants, theatrical and automotive among others that were severely hit by stay-at-home policies.
Nonetheless, Roku is expected to have benefited from advertising spend reallocation toward TV streaming as marketers accelerate their shift out of traditional TV and into TV streaming.
Additionally, product innovations in solutions like the Shopper Data Program with Kroger are expected to have driven monetized video ad impressions growth in the fourth quarter.
Moreover, increasing advertiser demand for new products offered by the company such as incremental reach guarantees and Roku’s OneView ad platform are expected to be key catalysts. The ad platform is designed to help advertisers use TV identity data to create ads across OTT, desktop and mobile from a single hub.
However, the bottom line is expected to have been weighed down by cost escalations, resulting from increased marketing expenses related to international expansion and content additions in the to-be-reported quarter.
What Our Model Says
According to the Zacks model, the combination of a positive Earnings ESP and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.
Roku has an Earnings ESP of -64.1% and a Zacks Rank #2. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks That Warrant a Look
Here are a few companies, which, per our model, have the right combination of elements to post an earnings beat in their upcoming release.
CrowdStrike Holdings Inc. (CRWD - Free Report) has an Earnings ESP of +57.75% and carries a Zacks Rank of 2, currently.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by referendums and legislation, this industry is expected to blast from an already robust $17.7 billion in 2019 to a staggering $73.6 billion by 2027. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
Image: Bigstock
ROKU Gears Up to Report Q4 Earnings: What's in the Cards?
Roku (ROKU - Free Report) is set to report fourth-quarter 2020 results on Feb 18.
The company expects fourth-quarter year-over-year revenue growth in the mid-40% range while platform revenues are expected to account for roughly two-thirds of total revenues.
The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $615.8 million, indicating 49.7% growth from the year-ago quarter reported figure.
Moreover, the consensus mark for loss has remained steady at 8 cents per share in the past 30 days. The estimated figure is narrower than loss of 13 cents reported in the year-ago quarter.
The company’s earnings beat the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 42.7%.
Let’s see how things have shaped up prior to this announcement.
Roku, Inc. Price and EPS Surprise
Roku, Inc. price-eps-surprise | Roku, Inc. Quote
Factors to Consider
Investor focus will be on active accounts growth, which is an important metric for Roku. The popularity of its free, ad-supported platform, The Roku Channel is expected to have aided active accounts growth in the fourth quarter of 2020. The ability to access free and premium content on the same platform has been a huge attraction for subscribers.
In the third quarter, the company reached a mutually beneficial agreement with Comcast (CMCSA - Free Report) -owned NBCUniversal to distribute the latter’s Peacock streaming services that include collaboration around marketing, advertising, and content for The Roku Channel.
Building on that partnership, Roku launched NBC News in The Roku Channel in time for the final presidential debate, expanding the overall reach and monetization of NBC News alongside its standalone NBC News app on the Roku platform.
Moreover, Roku announced that RTE Player, the on-demand service provided by Irish broadcaster RTE, is officially available on Roku streaming devices in Ireland.
The company’s active accounts jumped 43% year over year to 46 million in third-quarter 2020. Moreover, ARPU increased 20% to $27 (on a trailing 12-month basis).
Notably, the Zacks Consensus Estimate for fourth-quarter active accounts and ARPU is pegged at $50 million and $27.44, respectively, indicating an increase of 35.5% and 18.6% from the year-ago reported figures.
The expected solid surge in active accounts and viewing may have been the result of growth in subscription signups, movie rentals and purchases as well as elevated revenues from increased device sales.
Additionally, streaming hours growth is expected to have boosted TV streaming advertising on Roku’s platform. The consensus mark for streaming hours stands at 16.9 billion, implying an increase of 44.4% from the year-ago quarter’s reported figure.
In the fourth quarter, Roku announced a slate of releases on The Roku Channel in the United Kingdom including films such as The Devils Double, Muriel’s Wedding, Harry Price: Ghost Hunter and family friendly Christmas picks like Diana Show, Ryan’s World and crime-drama Little Miracles, which are expected to have boosted streaming hours in the to-be reported quarter.
The addition of Peloton app, Peloton Interactive’s virtual fitness platform for Roku streamers is also expected to have aided growth in streaming hours.
Further, the launch of streaming services — Apple TV+ and Disney+ — on Roku’s platform is expected to have aided Platform revenues, which accounted for 70.7% of revenues in the third quarter.
The consensus mark for Platform revenues is pegged at $402 million, indicating growth of 54.6% from the figure reported in the year-ago quarter.
Improving Advertising Business to Aid Top-Line
Moreover, the growing popularity of The Roku Channel is expected to have attracted advertisers in the to-be-reported quarter. Also, the acquisition of Dataxu (a demand-side advertising platform) is expected to have strengthened the company’s OTT advertising roadmap.
Meanwhile, the advertising business is expected to have witnessed delayed starts in video ad campaign, primarily from categories including travel, quick-serve restaurants, theatrical and automotive among others that were severely hit by stay-at-home policies.
Nonetheless, Roku is expected to have benefited from advertising spend reallocation toward TV streaming as marketers accelerate their shift out of traditional TV and into TV streaming.
Additionally, product innovations in solutions like the Shopper Data Program with Kroger are expected to have driven monetized video ad impressions growth in the fourth quarter.
Moreover, increasing advertiser demand for new products offered by the company such as incremental reach guarantees and Roku’s OneView ad platform are expected to be key catalysts. The ad platform is designed to help advertisers use TV identity data to create ads across OTT, desktop and mobile from a single hub.
However, the bottom line is expected to have been weighed down by cost escalations, resulting from increased marketing expenses related to international expansion and content additions in the to-be-reported quarter.
What Our Model Says
According to the Zacks model, the combination of a positive Earnings ESP and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.
Roku has an Earnings ESP of -64.1% and a Zacks Rank #2. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks That Warrant a Look
Here are a few companies, which, per our model, have the right combination of elements to post an earnings beat in their upcoming release.
Workday, Inc. (WDAY - Free Report) has an Earnings ESP of +1.16% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
CrowdStrike Holdings Inc. (CRWD - Free Report) has an Earnings ESP of +57.75% and carries a Zacks Rank of 2, currently.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by referendums and legislation, this industry is expected to blast from an already robust $17.7 billion in 2019 to a staggering $73.6 billion by 2027. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot stocks we're targeting >>