Roku Shares Gain 3% Despite Mixed Q1 Results & Muted Outlook

Roku (NASDAQ: ROKU) reported mixed Q1 results, topping revenue estimates but modestly failing to meet earnings expectations. Higher content distribution and advertising revenue led to the top-line beat. However, the company guided to Q2 revenues lagging the consensus estimate.

Despite the earnings miss and muted revenue outlook, shares of the streaming media giant gained almost 3% during the extended trading session on April 28.

Q1 Numbers

Notably, revenues jumped 28% year-over-year to $734 million and exceeded consensus estimates of $718.08 million. The increase in revenues reflected a surge in Platform revenue, which increased 39% to $647 million.

During the quarter, Roku added 1.1 million incremental Active Accounts, bringing the total to 61.3 million. Further, streaming hours increased by 1.4 billion hours sequentially to 20.9 billion, while average revenue per user (ARPU) jumped 34% year-over-year to $42.91.

Despite strong revenue numbers, the company posted a loss of $0.19 per share that fell a cent short of the analysts’ expected loss of $0.18 per share. Furthermore, it was much lower than the previous year’s earnings of $0.54 per share.

Q2 & FY2022 Outlook

Based on the current macro environment, management provided financial guidance for Q2FY2022.

For the second quarter, the company projects total net revenues to grow 25% year-over-year to $805 million, lower than the consensus estimate of $815.7 million.

Further, the company expects to achieve breakeven adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) on a total gross profit of $395 million.

For the full year, total net revenue is expected to grow by 35% year-over-year.

Management’s Commentary

Concluding the earnings call, top management stated, “The secular shift to TV streaming continues, and we are investing in the significant opportunity ahead of us. Our unique assets, including the Roku OS, Roku TV, The Roku Channel, and our sophisticated ad platform continue to position us to extend our leadership in the years ahead.”

Wall Street’s Take

The Wall Street community is cautiously optimistic about ROKU stock with a Moderate Buy consensus rating based on 20 Buys, two Hold, and two Sells. The average Roku price forecast of $172.40 implies almost 85.97% upside potential to current levels.

Roku’s Website Traffic

TipRanks’ Website Traffic Tool provided insight into Roku’s Q1 robust revenues performance well ahead of its results announcement.

Website traffic trends are a valuable indicator of performance, especially for streaming platforms like Roku. It shows how many people visited the website for streaming services over a particular period.

According to the tool, Roku’s website traffic recorded a 9.28% sequential increase in global estimated visits in Q1 2022. Similarly, year-to-date website traffic growth on all devices increased by 23.02% compared to the same period last year.

Conclusion

Roku managed to beat top-line expectations while most of its peers have lagged expectations succumbing to a challenging operating environment. For example, Netflix (NFLX) shares were down significantly last week after it reported quarterly decline in its subscriber base.

The muted outlook is based on continuing macro headwinds, including inflationary pressures, geopolitical conflict, and supply chain disruptions, and may lead to volatility like its peers in the coming months.

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