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Will Thriving Ad Business Aid Roku's (ROKU) Q4 Earnings?

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Roku’s (ROKU - Free Report) fourth-quarter 2019 results, set to be released on Feb 13, are expected to benefit from a thriving ad business.

Roku’s expanded licensing partnerships and advertising revenues from The Roku Channel and advertising video on demand (AVOD) partners are expected to have boosted top-line growth in the to-be-reported quarter.

The company witnessed robust growth in monetized video ad impressions in the third quarter, a trend which most likely continued in the to-be-reported quarter on increasing popularity of The Roku Channel.

Additionally, increased streaming hours growth is anticipated to have boosted TV streaming advertising on Roku’s platform with the launch of streaming services — Apple TV+ and Disney+ from Apple (AAPL - Free Report) and Disney (DIS - Free Report) , respectively, during the quarter.

This is expected to have driven customer acquisition ad revenues, subscription ad revenue share and advertising revenue share and thereby aided Roku’s Platform revenue growth in the to-be reported quarter. Roku’s Platform accounted for 68.7% of revenues in the third quarter.

Moreover, the acquisition of Dataxu (a demand-side advertising platform) in the fourth-quarter is expected to have accelerated Roku’s OTT advertising roadmap and enabled the company to provide marketers a single data-driven software solution to plan, buy and optimize their ad spend across TV and OTT. This is expected to have fortified the company’s advertiser base in the fourth quarter.

Click here to know how Roku’s overall performance is likely to be.

Roku, Inc. Revenue (TTM)

Roku, Inc. Revenue (TTM)

Roku, Inc. revenue-ttm | Roku, Inc. Quote

Player Unit Sales Likely to Grow

Player unit sales witnessed a 21% year-over-year jump in the third quarter, a trend which most likely continued in the fourth quarter, primarily backed by the company’s plan to keep Player ASP down.
 
The Zacks Consensus Estimate for fourth-quarter Player revenues is pegged at $133 million, indicating growth of 17.7% from the year-ago quarter reported figure.

However, a lowered ASP is expected to have hurt gross margin in the fourth quarter.

Meanwhile, the company unveiled limited edition onn. Roku TV and limited-edition Roku SE Player, which is priced at $18, during the quarter. These devices were retailer-exclusive versions available at Walmart (WMT - Free Report) for Black Friday (Nov 29).

Moreover, the company launched Atvio Roku TV lineup of smart TVs, which were exclusively available at Walmart stores in Mexico in the fourth quarter.

Competition Intensifies in smartTV Market

Roku is a leading player in the smartTV market, courtesy of its partnerships with the likes of TCL, JVC, Sharp and other leading TV-makers. The company’s smartTV market dominance is anticipated to have bolstered Platform revenues in the December-end quarter.

Notably, the Zacks Consensus Estimate for fourth-quarter Platform revenues is pegged at $261 million, indicating a jump of 72.8% from the year-ago quarter’s reported figure.

Nonetheless, the entry of Amazon, Google and Samsung has intensified competition in the smartTV market.

In order to counter the growing challenges, Roku partnered with Hisense for shipping the first Roku TV models powered by Roku OS to the United Kingdom in the fourth quarter. In the United Kingdom, Roku TVs include a strong portfolio of local content providers as well as global brands.

Roku had announced the expansion of its Roku TV licensing program in Europe during the third quarter.

Zacks Rank

Roku currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

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