Roku Plunges 22% on Q4 Revenue Miss and Weak Guidance

Shares of American TV streaming platform Roku, Inc. (NASDAQ: ROKU) plunged 22.3% during the extended trading session and continued its downward trajectory, after closing the day down 10.4% at $144.71 on February 17, ahead of its earnings.

Roku delivered mixed fourth-quarter results with revenues missing and earnings beating estimates. The slow revenue growth during the quarter was due to a decline in Roku TV unit sales, largely in part due to the ongoing supply chain issues, which hampered Roku TV’s OEM partners.

Mixed Results

Roku’s Q4 revenue advanced 33% year-over-year to $865.3 million. However, the figure failed to meet the consensus estimates of $896.54 million. Q4 Platform revenue grew 49% to $703.6 million, while Player revenue fell 9% to $161.7 million.

On a positive note, Q4 diluted earnings of $0.17 per share meaningfully surpassed the Street estimates of $0.07 per share. However, the figure came in below the Q4FY20 earnings of $0.49 per share.

FY21 revenues advanced 55% annually to $2.76 billion aided by an 80% jump to $2.28 billion in Platform revenue. Moreover, FY21 diluted earnings of $1.71 per share were much better than FY20-diluted losses of $0.14 per share.

Streaming Metrics

Compared to Q4FY20, Q4 Active accounts leaped to $60.1 million and streaming hours climbed to 73.2 billion.

Additionally, the Average Revenue Per User (ARPU) jumped 43% year-over-year to $41.03 billion. According to the hours streamed, Roku TV also became the No. 1 TV streaming platform across the U.S., Canada, and Mexico.

Official Comments

In a letter to shareholders, Founder and CEO of Roku, Anthony Wood, and CFO, Steve Louden, said, “We have an enormous opportunity ahead of us around the world. Time spent on TV streaming is increasing but is not yet equivalent to time spent on legacy TV, and ad budgets still significantly lag TV streaming viewership. With our competitive advantages — the Roku OS, The Roku Channel, and our ad platform built for TV streaming — we are strongly positioned to capture this opportunity.”

Q1FY22 Weak Guidance

According to Roku, the persistent supply chain issues will continue to affect the economy in 2022, particularly the consumer electronics space and the TV industry. Hence, Roku expects the TV unit sales to remain below the COVID-19 levels, affecting its active account growth.

Based on the same, Roku guided for Q1 revenue of $720 million, much lower compared to the consensus of $748.5 million. Further, Roku has also projected a Q1 net loss of 30 million.

Analysts’ View

Ahead of Roku’s quarterly results, Morgan Stanley analyst Benjamin Swinburne reiterated a Sell rating on the stock with a price target of $190, which implies 31.3% upside potential.

Although Roku continues to command the No. 1 spot in the U.S. streaming services, Swinburne expects its Active account growth to see a couple of bumps in the road ahead. According to the analyst, U.S. smart TV sales have declined in the quarter due to supply chain issues. Meanwhile, Roku’s most important OEM partner TCL, is pushing more Google TV SKU sales compared to Roku’s.

With 15 Buys and 2 Sells, the ROKU stock commands a Strong Buy consensus rating. The average Roku price target of $287.25 implies 98.5% upside potential to current levels. However, shares have lost 66.7% over the past year.

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