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ROKU to Report Q2 Earnings: Factors Influencing Results

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Roku, Inc. (ROKU - Free Report) is set to report second-quarter 2019 results on Aug 7.

The company’s earnings beat the Zacks Consensus Estimate in the trailing four quarters, delivering average positive surprise of 85.8%.

Investors would watch for active accounts growth, which is an important metric for Roku. In the last reported quarter, active accounts surged 40% year over year to 29.1 million. Streaming hours also jumped 74% year over year to 8.9 billion. Moreover, Average Revenue per User (ARPU) increased 27% to $19.06 (on a trailing 12-month basis).

For second-quarter 2019, Roku expects revenues between $220 million and $225 million. The Zacks Consensus Estimate for revenues is currently pegged at $224.8 million, which indicates growth of 43.3% from the figure reported in the year-ago quarter.

Further, the consensus mark for second-quarter loss has been steady at 22 cents over the past 30 days.

Roku, Inc. Price and EPS Surprise

 

Roku, Inc. Price and EPS Surprise

Roku, Inc. price-eps-surprise | Roku, Inc. Quote

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

Key Factors to Consider

The growing popularity of The Roku Channel is a key catalyst. The channel now offers access to more than 10,000 free ad-supported movies and TV episodes, and more than two dozen live streaming channels.

In the first quarter, the company added Premium Subscriptions to The Roku Channel, which now offers more than 30 premium-content services, including HBO, SHOWTIME, EPIX and STARZ.

The ability to access free and premium content on the same platform is a huge attraction for users. Hence, we expect Roku’s active accounts to grow in second-quarter 2019.

Notably, the Zacks Consensus Estimate for second-quarter active accounts and ARPU is pegged at 30.8 million and $20.77, respectively.

Moreover, growing active accounts are expected to attract advertisers to the platform.

Notably, in May, the company launched Activation Insights, a new analytics and planning tool for advertisers targeting OTT markets. The solution helps advertisers improve their ability to maximize ROI by offering analytical insight into OTT consumers.

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

Moreover, Roku is enhancing the flexibility to use and access the content on the platform. Compatibility with Amazon (AMZN - Free Report) Alexa-enabled devices was a step toward this goal.

The company’s ability to create better user experience is likely to drive the top line in second-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 #2 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 an earnings beat this quarter:

Callaway Golf (ELY - Free Report) has an Earnings ESP of +6.40% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

BrightView Holdings (BV - Free Report) has an Earnings ESP of +0.86% and a Zacks Rank #2.

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