It has been about a month since the last earnings report for Roku (ROKU Quick QuoteROKU - Free Report) . Shares have lost about 14.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Roku due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

ROKU's Q2 Earnings Beat, Revenues Ride on Strong Ad Growth

Roku reported second-quarter 2021 earnings of 52 cents per share compared with the Zacks Consensus Estimate of 14 cents per share. The company had reported a loss of 35 cents per share in the year-ago quarter.

Revenues soared 81.2% from the year-ago quarter’s level to $645.1 million and beat the consensus mark by 4.5%.

In the second quarter, Roku’s monetized video ad impressions more than doubled on a year-over-year basis. Number of advertisers outside the Ad Age 200 grew more than 50% year over year.

Active accounts jumped 28% year over year to 55.1 million, driven by the popularity of Roku streaming players and Roku TV models. Streaming Hours jumped 19% year over year to 17.4 billion.

Moreover, average revenue per user (ARPU) grew 46% to $36.46 (on a trailing 12-month basis).

Quarter Details

Platform revenues (82.5% of revenues) surged 117.4% year over year to $532.3 million, driven by significant increases in both content distribution activities and advertising.

Availability of third-party streaming channels on the Roku platform, including Discovery+, Disney+, HBO Max, Paramount+, NBCUniversal, as well as Peacock, Amazon Prime Video, AppleTV+, Hulu, and Netflix, besides continued investments in The Roku Channel, contributed to engagement growth in the second quarter of 2021.

Moreover, the company benefited from advertising spend reallocation toward TV streaming from traditional TV.

Player revenues (17.5% of revenues) increased 1.3% from the year-ago quarter’s levels to $112.8 million.

As a percentage of total revenues, gross margin expanded to 52.4% from 41.2% in the year-ago quarter.

Operating expenses, as a percentage of revenues, decreased to 41.7% from the year-ago quarter’s 53.1%.

Sales & marketing, research & development (R&D) and general & administrative (G&A) expenses contracted 350 basis points (bps), 610 bps and 170 bps, respectively.

In the second quarter, adjusted EBITDA came in at $122.4 million against EBITDA loss of $3.4 million in the year-ago quarter.

Operating income was $69.1 million in the reported quarter. The company had reported an operating loss of $42.2 million in the year-ago quarter.

Balance Sheet & Cash Flow

As of Jun 30, 2021, cash and cash equivalents, including short-term investments, were $2.08 billion compared with $2.07 billion as of Mar 31, 2021.

Guidance

For third-quarter 2021, Roku expects total net revenues between $675 million and $685 million. Gross profit is anticipated between $315 million and $325 million. The company expects adjusted EBITDA in the $60-$70 million band.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 123.15% due to these changes.

VGM Scores

At this time, Roku has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile 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 trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Roku has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.