Roku (ROKU - Free Report) shares have skyrocketed 100% since March 16, and they could benefit from the current coronavirus stay-at-home environment. Now the question is should investors consider buying the streaming TV company’s stock before it reports its Q1 fiscal 2020 financial results on Thursday, May 7?
Roku’s Simple Streaming Pitch
Roku is famous for its small devices that plug into TVs and allow users to watch streaming TV content from the likes of Netflix (NFLX - Free Report) and countless others. The company stands to grow along with the overall expansion of the streaming TV market that has everyone from Disney (DIS - Free Report) to Apple (AAPL - Free Report) trying to get in on the action. Last quarter, Roku said it predicted that “roughly half of all U.S. TV households will have cut the cord or never had traditional pay TV” by 2024.
Roku currently sells multiple streaming TV players, and it has expanded its reach via smart TVs that have its operating system built in. The company’s portfolio of devices helped Roku top the category with roughly 44.2% of viewers, according to eMarketer. This helped it beat out rivals Amazon Fire TV (AMZN - Free Report) , Google Chromecast (GOOGL - Free Report) , and Apple TV. Last year, Roku said that “nearly one in three smart TVs sold in the U.S. were Roku TVs.”
More recently, Wall Street has turned its focus to Roku’s expanding digital advertising business. The company is able to attract advertisers through its Roku Channel that allows users to watch free streaming movies and TV shows. Plus, the company sells advertising across its marketplace, enabling marketers to buy targeted ads, promote their streaming offering, and more.
Roku’s overall revenue surged 52% in fiscal 2019 to reach $1.13 billion, with its ad-heavy and subscription-focused platform sales up 78% to $740.8 million. In November, Roku also completed its purchase of demand-side platform firm Dataxu.
The Pandemic & Its Outlook
The coronavirus pandemic had forced millions of people around the world to stay inside. And even if things start to return to something like normal it seems hard to believe that people will quickly flock back to movie theaters or sporting events—if and when they reopen in the near-term. Netflix’s recent Q1 results highlighted the current stay-at-home world, when it added nearly 16 million subscribers to smash its pre-Covid-19 outlook.
That said, Roku did withdraw its 2020 outlook on April 13 amid all the uncertainty. However, it did provide some updated Q1 guidance. The company estimates that it will have 39.8 million active accounts as of March 31, up nearly 3 million since December 31, 2019. Roku also projected that its Q1 streaming hours will jump 49% from the year-ago period, and that its revenue will “be slightly higher” than its prior outlook.
Our current Zacks estimates call for Roku’s Q1 sales to jump 43.5% to reach $296.58 million. The company’s adjusted quarterly loss is expected to widen from -$0.09 in the prior-year quarter to hit -$0.45 a share.
Roku stock fell nearly 6% on Friday to $114.02 a share, as part of the broader market downturn. This puts it about 33% below its 52-week highs, which could give the stock room to run if it is able to impress Wall Street on Thursday, May 7.
However, with Roku’s earnings projected to head in the wrong direction and its sales growth expected to slow, it is likely prudent to wait for its actual results before diving in, especially since it shares have soared 100% since mid-March.
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