A month has gone by since the last earnings report for Roku (ROKU Quick QuoteROKU - Free Report) . Shares have added about 5.7% in that time frame, outperforming the S&P 500.

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

ROKU Q3 Loss Narrower Than Expected, Revenues Increase Y/Y

Roku reported third-quarter 2024 loss of 6 cents per share, narrower than the Zacks Consensus Estimate of a loss of 35 cents. The company had incurred a loss of $2.33 per share in the year-ago quarter.

Revenues increased 16.47% from the year-ago quarter’s level to $1.062 billion and beat the consensus mark by 4.37%. Growth of The Roku Channel’s streaming households and streaming hours drove third-quarter performance. Roku’s streaming households and streaming hours grew 13% and 20%, respectively, year over year.

Streaming Households were 85.5 million, representing a net increase of 2 million from the second quarter of 2024. The Roku Home Screen, which is the beginning of viewers’ streaming experience, reaches U.S. households with more than 120 million people every day, reflecting greater engagement and more monetization opportunities.

The Roku operating system (OS) was again the #1 selling TV OS in the United States, with TV unit sales greater than the next two TV operating systems combined. The Roku OS was also the #1 selling TV OS in Mexico and Canada.

Globally, users streamed a record 32 billion hours in the third quarter, up 20% hours from the prior quarter.

The average revenue per user remained flat year over year at $41.1 (on a trailing 12-month basis).

The Roku Channel remained the #3 app on Roku’s platform in the third quarter by both reach and engagement, with Streaming Hours up nearly 80% year over year. This ongoing growth is largely due to the company’s position as the lead-in to TV and Home Screen’s power to drive viewership. The Roku Channel’s Nielsens’ The Gauge hit an all-time high ranking for August 2024, representing 4.1% of total TV streaming time in the United States. Roku launched Roku Sports Channel in August providing viewers with free sports content. Good Morning Football: Overtime, a new extension series of NFL Network’s long-running Good Morning Football was also added to the Roku Channel.

Quarter Details

Platform revenues (85.5% of revenues) increased 15.43% year over year to $908.2 million, driven by contributions from streaming services distribution and advertising activities, despite continued softness within the media and entertainment vertical.

Devices revenues (14.5% of revenues) rose 23% from the year-ago quarter’s level to $154 million.

Operating Details

Gross margin, as a percentage of total revenues, expanded 476 basis points from the year-ago quarter’s level to 45.2%.

Operating expenses decreased 28.22% year over year to $515.83 million. As a percentage of total revenues, the metric contracted to 48.56% from 78.79% reported in the year-ago quarter.

Research & development and sales & marketing expenses decreased 36.64% and 22.96% on a year-over-year basis to $178.79 million and $237.04 million, respectively. General & administrative expenses increased 22.3% to $99.9 million.

In the third quarter, adjusted EBITDA was $98.2 million against adjusted EBITDA of $43.4 million in the year-ago quarter. Roku reported the fifth consecutive quarter of positive adjusted EBITDA and trailing 12-month free cash flow.

Operating loss was $35.8 million in the reported quarter compared with an operating loss of $349.8 million in the year-ago quarter.

Balance Sheet

As of Sept. 30, 2024, cash and cash equivalents were $2.12 billion compared with $2.05 billion as of June 30, 2024. As of Sept 30, 2024, Roku had no long-term debt.

Guidance

For fourth-quarter 2024, ROKU expects total net revenues of $1.14 billion, total gross profit of roughly $465 million and adjusted EBITDA of $30 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates review flatlined during the past month.

VGM Scores

Currently, Roku has a great Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Roku has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Roku is part of the Zacks Broadcast Radio and Television industry. Over the past month, Netflix (NFLX Quick QuoteNFLX - Free Report) , a stock from the same industry, has gained 16.1%. The company reported its results for the quarter ended September 2024 more than a month ago.

Netflix reported revenues of $9.82 billion in the last reported quarter, representing a year-over-year change of +15%. EPS of $5.40 for the same period compares with $3.73 a year ago.

For the current quarter, Netflix is expected to post earnings of $4.20 per share, indicating a change of +99.1% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Netflix. Also, the stock has a VGM Score of B.