Roku Surges 11% On Blowout Quarter; Street Bullish On Outlook

Shares in Roku (ROKU) are surging 11% in Friday’s trading after the streaming video platform reported a strong beat for the third quarter with revenue and EBITDA coming in well above Street estimates.

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Specifically, ROKU’s Q3 GAAP EPS of $0.09 beat consensus expectations by $0.50. Revenue of $451.7M topped analyst estimates by $83.62M, and surged 73.1% Y/Y. Meanwhile active accounts came in at 46M vs. 43M at the end of the previous quarter while ARPU (average revenue per user) of $27 represented 20% Y/Y growth.

During the quarter, Roku also announced that it achieved a 43% year-over-year active account growth rate and doubled the active account reach of The Roku Channel. Gross Margin reached 48%, a 2-pt Y/Y expansion.

“In Q3, Roku delivered outstanding financial and operational results led by robust demand for TV streaming products, strong growth in advertising and the expansion of content distribution partnerships” commented CEO Anthony Wood.

“As the ongoing COVID-19 pandemic continued to accelerate the shift of viewing away from traditional linear and pay TV, we continued to invest in competitive differentiation and execute well against our strategic plan” he added.

Looking forward, management said that it anticipates Q4 year-over-year revenue growth in the mid-40% range, similar to the growth rate in the last few holiday seasons, with platform revenue to account for roughly two-thirds of total revenue.

ROKU says it plans to keep Q4 player gross margins close to breakeven, with Q4 platform gross margins in the mid-50% to 60% range.

“All in, Q3 Fundamentals were very strong, with record Revenue growth, strength across Platform & Player, a record-high EBITDA Margin, and Ads growth benefiting from the continued shift from linear to CTV” cheered RBC Capital analyst Mark Mahaney post-print.

He reiterated his buy rating on the stock while ramping up his price target from $208 to $262. (See ROKU stock analysis on TipRanks).

“We view Roku as well positioned in arguably the fastest growing Ad Vertical today – OTT/CTV, which should support sustainable premium Revenue growth and margin expansion for years to come” Mahaney concluded.

Overall, ROKU scores a cautiously optimistic Moderate Buy Street consensus with 11 buy ratings, 4 hold ratings and 2 sell ratings. Meanwhile the average analyst price target stands at $227, with shares already up over 88% year-to-date.