Roku (ROKU - Free Report) shares have soared 108% this year to destroy the S&P 500’s 16% climb, the media market’s 25% surge, and Netflix’s (NFLX - Free Report) 42% comeback. With the streaming TV company’s impressive 2019 in mind, let’s take a look to see if investors should think about buying ROKU stock before it reports its first-quarter fiscal 2019 financial results on Wednesday, May 8.
Roku sells devices that allow customers to watch streaming services such as Netflix, Hulu, Amazon Prime (AMZN - Free Report) , HBO (T - Free Report) , and others all in one place. The Los Gatos, California-based company currently boasts a larger market share than rivals like Apple TV (AAPL - Free Report) , Amazon Fire TV, and Google’s (GOOGL - Free Report) Chromecast, according to eMarketer. Investors should also note that Roku claims that more than one in four smart TVs sold in the U.S. in 2018 were Roku TVs—it has partnership with Sharp, RCA, JVC, and more.
More recently, the firm rolled out its Roku Channel. The offering allows users to watch free streaming movies and TV shows and could become more popular as more people ditch cable. The company sells advertising on the Roku Channel and has a marketplace that allows marketers to buy targeted ads. Roku is also likely to benefit from the entry of Disney (DIS - Free Report) , AT&T, Apple, and NBCUniversal (CMCSA - Free Report) , into the streaming TV market over the next year.
Roku is also in the early stages of its international expansion. The company said last quarter that it expects to see its investments start to pay off in 2020. Global expansion is key because Roku has said that active account growth will be one of the most significant long-term drivers of profit and loss.
Before we see what to expect from Roku’s first-quarter earnings, it is worth noting that the stock has been on a roller coaster ride since going public in September 2017. Despite some of the up and down movement, shares of Roku have soared over 170% and currently sit at roughly $64 per share, down 18% off their 52-week intraday high of $77.57. This gives the stock more room to run heading into earnings.
Our current Zacks Consensus Estimate calls for Roku’s Q1 2019 revenue to surge 38.4% to hit $189.06 million. This would fall short of Q4’s 46% top-line expansion, but it is worth pointing out that the company topped our revenue estimate by 6% last quarter.
Furthermore, Roku’s active account total is projected to climb over 36% from 20.8 million in the prior-year quarter to 28.39 million, based on our NFM estimates. Last quarter, this key figure popped 40%. Overall, Roku’s fiscal 2019 revenue is projected to jump 37.2% to reach $1.02 billion, with 2020’s sales expected to come in 32% higher than our current-year estimate.
At the bottom end of the income statement, things look a lot worse for the streaming TV firm. The company’s first-quarter earnings are projected to plummet 242% from a loss of $0.07 per share to a loss or $0.24 a share. However, Wall Street might not care much about Roku’s earnings just yet as it spends more heavily on expansion.
Plus, the company has surpassed our quarterly earnings estimate by an average of 84% over the trailing four periods. And Roku’s earnings are projected to climb 19% over the next three to five years on an annualized basis.
Roku is currently a Zacks Rank #3 (Hold) that sports an “A” grade for Growth in our Style Scores system. The stock is clearly a tech growth play at the moment with its valuation picture sky high. But the company’s top-line outlook appears strong amid the booming streaming TV market.
Still, investors might want to wait to buy Roku until after its earnings release as the stock has been known to swing pretty wildly right around earnings. Roku is scheduled to report its Q1 2019 financial results after the market closes on Wednesday, May 8.
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