Roku, Inc. (ROKU) gained about 2% in the after-hours trading session yesterday following the release of better-than-expected results for the second quarter. The company’s Q2 performance was driven by an expansion in its user base and a decline in operating costs.
Interestingly, looking at Roku’s past earnings history, we see that the company has missed estimates in only two out of the past 16 quarters. For a thorough assessment of ROKU stock, go to TipRanks’ Stock Analysis page.
With this background, let’s delve into Roku’s Q2 performance.
Roku: Q2 Highlights
Roku managed to narrow losses in Q2. It reported a net loss of $0.24 per share, lower than the prior-year quarter’s loss of $0.76 and compared favorably with the Street’s loss estimate of $0.42. Lower operating expenses contributed to this improved performance.
Further, the company delivered revenues of $968.2 million, up about 14% year-over-year and above the analysts’ estimates of $938 million. The top-line growth was due to a 14% increase in streaming households (previously known as active accounts) and a 20% jump in streaming hours.
In terms of segments, Roku’s Platform unit revenue, which includes advertising sales, content sales, and subscription revenue sharing, grew 11%. Furthermore, Devices revenue jumped 39%.
Interestingly, bullish analysts on Roku stock were banking on its Platform segment to support the results. According to TipRanks’ Bulls Say, Bears Say tool, one of the positive arguments highlights Roku’s growth strategy, which focuses on increasing Platform sales by expanding its user base and driving subscription growth.
Outlook
The company expects to deliver total revenue of $1.01 billion in Q3, reflecting year-over-year growth of 11%. Revenues in the Devices and Platform segments are expected to grow by 9% and 24% respectively. Further, the company anticipates a positive adjusted EBITDA of $45 million for the quarter.
Is Roku a Buy, Sell, or Hold?
Based on the rating of 15 Wall Street analysts, Roku is currently a Moderate Buy. It received eight Buy, five Hold, and two Sell recommendations in the past three months.
After a year-to-date decline of about 40%, the analysts’ average price target on Roku stock of $76.14 implies an upside potential of 37.61%.
However, it’s worth noting that estimates will likely change following today’s earnings report.
