Roku Plunges 8.6% After-Hours Despite Exceptional Q2 Results

Shares of California-based television streaming platform Roku (ROKU) lost 8.6% and closed at $384.01 in extended trading hours on Wednesday even though it posted exceptional financial results for the second quarter of 2021.

Roku reported earnings per share (EPS) of 0.52, compared to a loss of $0.35 per share in the second quarter of 2020. The EPS beat the Street’s estimate of $0.12. Total net revenue grew 81% year-over-year to $645.1 million, surpassing analysts’ expectations of $618.54 million.

Driven by increased revenues from advertising activities and content distribution, Platform revenue surged 117% year-over-year to $532.3 million. Player revenue rose 1% to $112.8 million, and the number of Active Accounts increased 1.5 million quarter-over-quarter to 55.1 million.

For the third quarter, the company expects total net revenue of $680 million, up 51% year-over-year. (See Roku stock chart on TipRanks)

Roku said, “Within the Player segment, we expect global supply chain constraints and component cost increases to worsen in the second half of 2021, leading to increasing negative player gross margin. We believe these industry supply chain constraints and cost increases for streaming players and TV OEM partners will continue into 2022. Within the Platform segment, monetization remains strong, and while there will be a slowdown in year-over-year growth relative to last year’s pandemic-driven acceleration, we expect continued significant growth in the second half of the year.”

On August 2, Morgan Stanley analyst Benjamin Swinburne raised the stock’s price target to $325 from $300 (22.7% downside potential) but maintained a Sell rating, citing multiple compressions and decelerating growth in the future.

Overall, the stock has a Strong Buy consensus based on 14 Buys, 2 Holds and 1 Sell. The average Roku price target of $468.18 implies 11.4% upside potential. Shares of the company have gained 154.1% over the past year.