Roku (ROKU Quick QuoteROKU - Free Report) , a key player in the streaming industry, witnessed a surge of about 3% in its stock on Wednesday. This surge followed the company's announcement of a series of cost-cutting measures, including workforce reductions, in a concerted effort to reduce operating expenses.

Workforce Reductions and Hiring Slowdown

In a regulatory filing unveiled on Wednesday morning, Roku disclosed its plan to streamline its workforce by eliminating 10% of its employees, equating to approximately 300 jobs. Additionally, the company announced a deceleration in its pace of hiring, as quoted on a Yahoo Finance article. This marks Roku's third round of layoffs in less than a year, with prior cuts of 200 jobs in both March 2023 and November 2022.

Upbeat Financial Projections

Roku's cost-cutting measures have already started yielding results in terms of its financial projections. Excluding charges related to severance and select content removal from its streaming platform, the company now anticipates third-quarter net revenue in the range of $835 million to $875 million, accompanied by adjusted EBITDA in the range of negative $40 million to negative $20 million. This outlook surpasses its previous third-quarter forecast, which projected revenue at approximately $815 million and adjusted EBITDA at negative $50 million.

Roku’s Upbeat Expected Growth Versus Broadcast Radio and Television Industry

Roku’s expected growth rate for the next year is 33.85% versus 28% consensus growth rate expected by Broadcast Radio and Television and 16.69% growth rate expected by the S&P 500. The Consensus Estimate for growth rate for the next five years is 19% versus the industry growth rate of 12.20%

Positive Analyst Response

The unexpected upward revision of guidance from Roku led to favorable responses from market analysts. JPMorgan, for instance, reaffirmed its Overweight rating on Roku's stock, as quoted on the above-mentioned Yahoo Finance article.

Analyst Cory Carpenter noted that the 7% increase in revenue at the high end of expectations, just two months into the quarter. Carpenter highlighted that the revenue boost was partly driven by improved advertising spend across verticals, particularly in areas like consumer-packaged goods (CPG), health and wellness, and travel, which bodes well for the online advertising sector.

Wells Fargo analyst Steve Cahall expressed optimism about Roku's potential for growth, even amid ongoing industry challenges. Cahall, who reiterated his Equal Weight rating and suggested that the improved revenue outlook and Roku's cost-cutting initiatives could significantly enhance estimated adjusted EBITDA for 2024.

Any Wall of Worry?

Roku's second-quarter results indicated that brand advertising remained under pressure. Roku's management previously cautioned that ongoing Hollywood strikes would continue to negatively impact media and entertainment spending throughout the latter half of the year. This is a key negative given Roku's heavy promotion of content.

Against this backdrop, investors can take a look at the Roku-heavy ETFs that can gain ahead.

ETFs in Focus

ARK Next Generation Internet ETF (ARKW Quick QuoteARKW - Free Report) – Roku has 8.62% Exposure

ARK Innovation ETF (ARKK Quick QuoteARKK - Free Report) – Roku has 8.51% Exposure

iShares U.S. Telecommunications ETF (IYZ Quick QuoteIYZ - Free Report) – Roku has 3.50% Exposure