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Roku (ROKU) to Report Q1 Earnings: What's in the Cards?

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Roku, Inc. (ROKU - Free Report) is set to report first-quarter 2019 results on May 8.

The company’s earnings beat the Zacks Consensus Estimate in the trailing four quarters, delivering average positive surprise of 84.26%.

In the last reported quarter, Roku’s active accounts increased 40% year over year to 27.1 million. Additionally, average revenue per user (ARPU) increased 30% to $17.95 (on a trailing 12-month basis).

Roku, Inc. Price and EPS Surprise

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

The Zacks Consensus Estimate for first-quarter active accounts and ARPU is pegged at 28.39 million and $19.02, respectively.

The Zacks Consensus Estimate for first-quarter revenues is currently pegged at $189.1 million, which indicates growth of 38.4% from the year-ago reported figure. Management anticipates revenues in the range of $185-$190 million.

The consensus estimate for loss has been steady at 24 cents over the past seven days.

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

Key Factors to Consider

Roku’s first-quarter 2019 results are likely to benefit from the popularity of The Roku Channel.

The free-to-watch channel, which allows users to watch about 10,000 movies and TV shows, is likely to boost user engagement. Additionally, in the to-be-reported quarter, Roku added more than 25 premium subscription partners including STARZ, SHOWTIME and EPIX to The Roku Channel. With the feature, users can access their premium accounts or subscribe to new ones.

The ability to access free and premium content at one place is likely to attract users. This is expected to boost Roku’s active accounts in first-quarter 2019. Moreover, growing active accounts is expected to attract advertisers to the platform.

Further, with Roku marketplace that allows marketers to buy targeted ads, we expect the company to monetize the ad load in the to-be-reported quarter.

Roku is enhancing the flexibility to use and access the content on the platform. The company made its devices “compatible with Amazon (AMZN - Free Report) Alexa-enabled devices” in first-quarter 2019. This means, users can control their Roku devices by passing commands to devices enabled with Alexa.

We believe that Roku’s ability to create better user experience is likely to aid top-line growth in first-quarter 2019.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP.  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 some companies, which, per our model, have the right combination of elements to post earnings beat this quarter:

Rent-A-Center, Inc. has an Earnings ESP of +21.98% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Electronic Arts Inc. (EA - Free Report) has an Earnings ESP of +11.35% and a Zacks Rank #1.

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Roku, Inc. (ROKU) - free report >>

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