Back to top

Can Growth in Active Accounts Aid Roku's (ROKU) Q4 Earnings?

Read MoreHide Full Article

Roku, Inc. (ROKU - Free Report) is set to report fourth-quarter 2018 results on Feb 21.

The company’s earnings beat the Zacks Consensus Estimate in the trailing four quarters, delivering average positive surprise of 85.4%. In the last reported quarter, the company’s adjusted loss of 9 cents per share was narrower than the Zacks Consensus Estimate of a loss of 13 cents.

Moreover, Roku’s top line beat the consensus mark in all the trailing four quarters. In third-quarter 2018, revenues came in at $173 million, beating the Zacks Consensus Estimate of $171 million and increasing 39% from the year-ago quarter.

The Zacks Consensus Estimate for fourth-quarter revenues is currently pegged at $261.5 million, which indicates year-over-year growth of 38.9%. Moreover, the consensus mark for earnings has been steady at 1 cent over the past seven days.

Roku, Inc. Price and EPS Surprise


Roku, Inc. Price and EPS Surprise
| Roku, Inc. Quote

Let’s see how things are shaping up prior to this announcement.

Key Factors to Consider

Roku’s active accounts continue to witness strong growth owing to increasing shift in user preferences toward streaming services. Additionally, the company’s partnership with TV brands through its Roku TV licensing program is one of the primary drivers behind active accounts growth.

Moreover, Roku is attracting users by providing alternative TV offerings from streaming and on-demand video content providers. Notably, the company anticipates fourth-quarter 2018 active accounts to increase 40% year over year to 27 million, which is a positive.

This apart, Roku’s ability to attract advertisers and content publishers, which allows it to monetize its active accounts base, is expected to boost average revenue per user (ARPU) in the soon-to-be reported quarter. Notably, trailing 12-month ARPU increased 37% year over year to $17.34 in third-quarter 2018 due to higher ARPU from video and display ads.

Additionally, Roku’s Ad Insights suite, which helps advertisers measure reach, effectiveness and ROI, is expected to increase the number of ads placed on the platform, thereby boosting ads ARPU. Moreover, as increasing number of advertisers are flocking to digital platforms due to increase in cord cutters, we expect Roku to grow its advertising partners. Notably, about two-thirds of Advertising Age's 200 leading national advertisers have advertised on the platform.

Further, content publishers are increasingly choosing Roku owing to its highly engaged audience, measured by streaming hours. Notably, streaming hours were 6.2 billion in third-quarter 2018, up 63% year over year. Management anticipates streaming hours in fourth-quarter 2018 to be 7.3 billion, up 68% year over year.

We believe that Roku’s ability to attract advertisers and content creators along with creating better user experience is likely to aid top-line growth.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) along with a positive Earnings ESP has a good chance of beating estimates. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

Roku has a Zacks Rank #3 and an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are a few companies you may want to consider as our model shows that these have the right combination of elements to post earnings beat in their upcoming releases:

Live Nation Entertainment (LYV - Free Report) has an Earnings ESP of +3.8% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Churchill Downs, Incorporated (CHDN - Free Report) has an Earnings ESP of +12.9% and a Zacks Rank #2.

Steven Madden, Ltd. (SHOO - Free Report) has an Earnings ESP of +3.1% and a Zacks Rank #2.

The Hottest Tech Mega-Trend of All

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>



More from Zacks Analyst Blog

You May Like