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Why Is Roku (ROKU) Down 7.6% 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 lost about 7.6% 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 catalysts.
ROKU's Q4 Loss Narrower Than Expected, Revenues Increase Y/Y
Roku reported fourth-quarter 2022 loss of $1.71 per share, narrower than the Zacks Consensus Estimate of a loss of $1.73. The company had reported earnings of 17 cents per share in the year-ago quarter.
Revenues increased 0.2% from the year-ago quarter’s level to $866.9 million and beat the consensus mark by 7.61%. Growth of the Roku Channel’s reach and engagement drove fourth-quarter performance.
Active Account net adds were 4.6 million in fourth-quarter and 9.9 million in 2022, ending the year with 70 million active accounts globally, driven primarily by the Roku TV program in the United States and international markets.
Roku has become the No. 1 TV streaming platform by hours streamed in the United States, Canada and Mexico. Globally, users streamed a record of 23.9 billion hours in the fourth quarter, up 23% from the prior-year quarter.
The average revenue per user rose 2% from the prior-year quarter’s levels to $41.68 (on a trailing 12-month basis).
For the fourth 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 grew engagement by over 85% year over year and it reached U.S. households with an estimated 100 million people.
Quarter Details
Platform revenues (84.3% of revenues) increased 4.6% year over year to $731.2 million through increased advertising sales, the distribution of streaming services, the distribution of FAST channels, Roku Pay and Media & Entertainment promotional capabilities.
Inflation and macro-economic uncertainty continued to pressure consumers and advertisers in fourth-quarter. The total U.S. ad market weakened throughout the quarter, declining 12% year over year in December, after decreases of 2% and 6% in October and November, respectively (according to SMI).
Player revenues (15.7% of revenues) declined 18.4% from the year-ago quarter’s level to $135.7 million.
In the fourth quarter, Roku TV gained market share and the company extended leadership in the United States, Canada and Mexico. According to NPD, the Roku operating system (OS) was the No. 1 selling smart TV OS in the United States and 38% share of units sold in fourth-quarter was more than the next two largest TV operating systems combined. The Roku OS was also the No. 1 selling smart TV OS in Canada and No. 1 in Mexico, where it grew to 30% of units sold.
The company continued to expand Roku TV licensing program. In the United States, the new TCL Roku TV 6-Series won the CNET Editor’s Choice award in 2022 and was described as the “best TV for the money” for the fifth year in a row.
In Canada, the company extended Walmart partnership with on Roku TV models. In Mexico, the company added three new Roku TV licenses for a total of 12 partners that now offer a broad lineup of Roku TV models. In Brazil, AOC launched a new lineup of 4K Roku TV models and Semp TCL launched six new Roku TV models.
In the UK, RCA entered the market with new Roku TV models and TCL launched the UK’s first-ever QLED Roku TV model. Roku expanded Roku TV program with TCL and Metz in Germany and with TCL in Australia.
Operating Details
Gross margin, as a percentage of total revenues, contracted 190 basis points from the year-ago quarter’s level to 42%.
Operating expenses increased 71.5% year over year to $614.2 million. As a percentage of total revenues, the metric expanded to 70.9% from 41.4% in the year-ago quarter.
Research & development, sales & marketing and general & administrative expenses grew 74.5%, 82.2% and 40.4% on a year-over-year basis to $220.6 million, $297.5 million and $96 million, respectively.
In the fourth quarter, negative adjusted EBITDA was $95.2 million compared with $86.7 million in the year-ago quarter.
Operating loss was $249.8 million in the reported quarter against operating income of $21.3 million in the year-ago quarter.
Balance Sheet
As of Dec 31, 2022, cash and cash equivalents were $1.96 billion compared with $2.01 billion as of Sep 30, 2022.
As of Dec 31, 2022, Roku had total debt of $79.9 million compared with $82.4 million on Sep 30, 2022.
Guidance
For first-quarter 2023, Roku expects total net revenues of $700 million, total gross profit of roughly $310 million and adjusted EBITDA of negative $110 million.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -17.26% due to these changes.
VGM Scores
Currently, Roku has a poor Growth Score of F, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. 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.
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Why Is Roku (ROKU) Down 7.6% Since Last Earnings Report?
A month has gone by since the last earnings report for Roku (ROKU - Free Report) . Shares have lost about 7.6% 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 catalysts.
ROKU's Q4 Loss Narrower Than Expected, Revenues Increase Y/Y
Roku reported fourth-quarter 2022 loss of $1.71 per share, narrower than the Zacks Consensus Estimate of a loss of $1.73. The company had reported earnings of 17 cents per share in the year-ago quarter.
Revenues increased 0.2% from the year-ago quarter’s level to $866.9 million and beat the consensus mark by 7.61%. Growth of the Roku Channel’s reach and engagement drove fourth-quarter performance.
Active Account net adds were 4.6 million in fourth-quarter and 9.9 million in 2022, ending the year with 70 million active accounts globally, driven primarily by the Roku TV program in the United States and international markets.
Roku has become the No. 1 TV streaming platform by hours streamed in the United States, Canada and Mexico. Globally, users streamed a record of 23.9 billion hours in the fourth quarter, up 23% from the prior-year quarter.
The average revenue per user rose 2% from the prior-year quarter’s levels to $41.68 (on a trailing 12-month basis).
For the fourth 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 grew engagement by over 85% year over year and it reached U.S. households with an estimated 100 million people.
Quarter Details
Platform revenues (84.3% of revenues) increased 4.6% year over year to $731.2 million through increased advertising sales, the distribution of streaming services, the distribution of FAST channels, Roku Pay and Media & Entertainment promotional capabilities.
Inflation and macro-economic uncertainty continued to pressure consumers and advertisers in fourth-quarter. The total U.S. ad market weakened throughout the quarter, declining 12% year over year in December, after decreases of 2% and 6% in October and November, respectively (according to SMI).
Player revenues (15.7% of revenues) declined 18.4% from the year-ago quarter’s level to $135.7 million.
In the fourth quarter, Roku TV gained market share and the company extended leadership in the United States, Canada and Mexico. According to NPD, the Roku operating system (OS) was the No. 1 selling smart TV OS in the United States and 38% share of units sold in fourth-quarter was more than the next two largest TV operating systems combined. The Roku OS was also the No. 1 selling smart TV OS in Canada and No. 1 in Mexico, where it grew to 30% of units sold.
The company continued to expand Roku TV licensing program. In the United States, the new TCL Roku TV 6-Series won the CNET Editor’s Choice award in 2022 and was described as the “best TV for the money” for the fifth year in a row.
In Canada, the company extended Walmart partnership with on Roku TV models. In Mexico, the company added three new Roku TV licenses for a total of 12 partners that now offer a broad lineup of Roku TV models. In Brazil, AOC launched a new lineup of 4K Roku TV models and Semp TCL launched six new Roku TV models.
In the UK, RCA entered the market with new Roku TV models and TCL launched the UK’s first-ever QLED Roku TV model. Roku expanded Roku TV program with TCL and Metz in Germany and with TCL in Australia.
Operating Details
Gross margin, as a percentage of total revenues, contracted 190 basis points from the year-ago quarter’s level to 42%.
Operating expenses increased 71.5% year over year to $614.2 million. As a percentage of total revenues, the metric expanded to 70.9% from 41.4% in the year-ago quarter.
Research & development, sales & marketing and general & administrative expenses grew 74.5%, 82.2% and 40.4% on a year-over-year basis to $220.6 million, $297.5 million and $96 million, respectively.
In the fourth quarter, negative adjusted EBITDA was $95.2 million compared with $86.7 million in the year-ago quarter.
Operating loss was $249.8 million in the reported quarter against operating income of $21.3 million in the year-ago quarter.
Balance Sheet
As of Dec 31, 2022, cash and cash equivalents were $1.96 billion compared with $2.01 billion as of Sep 30, 2022.
As of Dec 31, 2022, Roku had total debt of $79.9 million compared with $82.4 million on Sep 30, 2022.
Guidance
For first-quarter 2023, Roku expects total net revenues of $700 million, total gross profit of roughly $310 million and adjusted EBITDA of negative $110 million.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -17.26% due to these changes.
VGM Scores
Currently, Roku has a poor Growth Score of F, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. 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.