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Should You Buy Roku Stock Ahead of Q3 Earnings?

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Shares of Roku (ROKU - Free Report) have plummeted over 16% during the last month as part of the larger market pullback. But the streaming TV firm still looks strong ahead of its third-quarter earnings release Wednesday.

Overview

Roku went public in the fall of 2017 and benefited from its presence in the internet entertainment revolution. On top of that, the firm looks impressive based on its own credentials. The company sells an array of devices that allow customers to watch their favorite streaming services such as Netflix (NFLX - Free Report) and Amazon (AMZN - Free Report) Prime all in one place, similar to Apple (AAPL - Free Report) TV or Google’s (GOOGL - Free Report) Chromecast.

Furthermore, the Roku Channel and its new targeted advertising push look poised to help boost revenues. The Roku Channel allows users to watch hundreds of streaming movies and TV shows for free without a subscription.

Roku’s active accounts jumped 46% year-over-year to 22.0 million in the second quarter. Maybe more importantly, Roku’s average revenue per user surged 48% to reach $16.60 as streaming hours skyrocketed 57%. Meanwhile, the company’s overall revenue also jumped 57% to $156.8 million. Plus, the company said that roughly one in four smart TVs sold in the U.S. in the first half of 2018 were Roku TVs.

Stock Price

Moving on, we can clearly see that shares of Roku have soared since the firm went public at $14 per share in September 2017. Shares of Roku skyrocketed to as high as $77.57 per share at the start of October. Investors should note that Roku stock closed Monday at $56.85 per share, down roughly 27% from its 52-week high.

Roku shares slipped once again through late afternoon trading Tuesday, which sets up what could prove to be a solid buying point.

 

 

Outlook

Roku is projected to see its revenues climb by 36.97% to reach $170.91 million, based on our current Zacks Consensus Estimate. Meanwhile, the company’s full-year revenues are projected to hit $722.45 million, which would mark a nearly 41% surge.        

At the other end of the income statement, Roku is expected to post an adjusted loss of $0.13 per share, which is hardly uncommon for a young tech company. Plus, Roku has earned some positive earnings estimate revisions over the last seven days for Q3, as well as for fiscal 2018 and 2019.

Bottom Line

Roku is currently a Zacks Rank #2 (Buy) based on its recent positive earnings estimate revision activity. The company sports an “A” grade for Growth in our Style Scores system. It is also worth pointing out that Roku crushed our quarterly earnings estimates in the trailing three periods. Therefore, based on its own growth prospects and Roku’s position in the booming internet-based TV industry, it seems like Roku stock might be worth considering before its Q3 earnings release.

Roku is scheduled to release its third quarter 2018 financial results after the market closes on Wednesday.

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