Roku Could Post Widest Loss in Three Years as Ad Spending Dries Up

Key Takeaways

  • Analysts estimate a loss per share for Roku of $1.24, swinging from earnings per share (EPS) of 48 cents in Q3 FY 2021.
  • The variety of lively accounts at Roku is anticipated to rise to its highest degree, however at a slowing tempo relative to prior quarters.
  • Income is anticipated to develop at a fraction of the tempo of the prior-year quarter.

Roku Inc. (ROKU), among the many prime eight leisure platforms within the U.S. by app downloads, in all probability swung to a loss within the third quarter as recession and inflation fears immediate a pullback in digital promoting.

Roku in all probability misplaced $1.24 per share, the widest for the reason that second quarter of 2019, in contrast with a revenue of 48 cents a share a yr in the past. Income development is more likely to have slowed to only 4% from 50% a yr in the past, based on common estimates from Seen Alpha.

Roku will depend on advert gross sales which have been pummeled by a cooling economic system, rising rates of interest and accelerating inflation. Different tech firms have been equally affected, prompting Netflix Inc. (NFLX) to launch a model of its platform with adverts in coming weeks. Whereas Roku’s merchandise are used to stream Netflix, analysts do not anticipate Roku to reap advantages of an uptick in advert gross sales for the brand new platform.

Additionally key to advert income is Roku’s complete variety of lively accounts, which gauges the dimensions of the corporate’s consumer base. Extra subscribers imply extra individuals that can see adverts, making the platform extra engaging to advertisers. Analysts predict Roku’s lively accounts will attain 64 million, an all-time excessive that additionally represents slowing development relative to latest quarters.

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Shares of Roku plunged beginning late in 2021 and have drifted additional downward within the final quarter. The corporate’s inventory dropped 83% within the final yr relative to a decline of 16% for the S&P 500 Index (see chart under).

Supply: TradingView.

Roku Earnings Historical past

After years of struggling to publish constant revenue, Roku reported six consecutive quarters of optimistic earnings beginning in Q3 2020. It reversed that development on this yr’s first two quarters, swinging to losses that analysts anticipate widened anew within the third quarter.

The corporate posted sturdy income in the course of the preliminary levels of the COVID-19 pandemic. After reaching its quickest tempo within the first quarter of 2021, development in all probability slowed by essentially the most tempo in at the very least six years within the third quarter.

Roku Key Stats
  Estimate for Q3 FY 2022 Q3 FY 2021 Q3 FY 2020
Earnings Per Share ($) -1.24 0.48 0.09
Income ($M) 703.9 680.0 451.7
Energetic Accounts (M) 64.0 56.4 46.0

Supply: Seen Alpha

The Key Metric

Roku defines lively accounts because the variety of distinct consumer accounts which have streamed content material on its platform throughout the previous 30 days of the interval. The corporate does not distinguish between distinctive people streaming content material on the identical account, although lively accounts are nonetheless intently correlated with the variety of viewers, and thus the potential attain for advertisers.

Energetic accounts have been slowing since late 2018, regardless of the pandemic-era uptick. Analysts predict that third-quarter development was lower than a 3rd the tempo of development two years in the past.