Roku Could Swing to a Loss on Weak Ad Spend, Despite Account Growth

Key Takeaways

  • Roku will seemingly report losses per share of $1.73 within the fourth quarter vs. earnings per share of $0.17 a 12 months earlier.
  • Income is anticipated to fall 7.7% to $798.4 million.
  • Inflation has slowed promoting spending, a key income stream.
  • Nonetheless, Roku’s person base is rising, with the corporate anticipating over 70 million lively accounts for the fourth quarter in comparison with 60.1 million a 12 months prior.

Roku Inc. (ROKU), among the many prime 9 leisure platforms within the U.S. by app downloads, seemingly swung to web losses on falling income for the fourth quarter amid a difficult surroundings for advert gross sales.

Roku’s web losses attributable to shareholders may very well be $241.5 million, the widest in firm historical past, in comparison with $23.7 million in revenue for the prior-year quarter, in line with analyst estimates from Seen Alpha. Losses per share may very well be $1.73, in opposition to earnings per share (EPS) of $0.17 in the identical interval final 12 months. Income is anticipated to say no 7.7% to $798.4 million.

Roku will report fourth quarter and FY 2022 outcomes after markets shut on Feb. 15.

Inflation weighed on promoting spending and good TV gross sales, each of that are essential to Roku’s enterprise. The macroeconomic surroundings can also be slowing the shift from linear TV to digital advert spending, regardless of strikes from streaming platforms like Netflix Inc. (NFLX) and Disney+ to supply ad-supported subscription plans.

“The underside line is that present macroeconomic developments seemingly set Roku again on its development trajectory by roughly a 12 months,” wrote Wedbush analysts Alicia Reese and Michael Pachter in a latest report.

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But they’re optimistic Roku can make the most of improved enterprise circumstances. “We predict there’s nonetheless important runway forward for shifting advert {dollars} from linear TV to digital, and Roku is poised to take a significant and rising share of this shift.”

Roku shares have recovered early in 2023 however stay down 66% within the final 12 months, in contrast with a 24% drop for the S&P 500 Communication Providers Index.

Supply: TradingView.
Roku Key Stats
  Estimate for This autumn FY 2022 Precise for This autumn FY 2021 Precise for This autumn FY 2020
Earnings Per Share ($) -1.73 0.17 0.49
Income ($M) 798.4 865.3 649.9
Lively Accounts (M) Over 70 (primarily based on firm estimates) 60.1 51.2

Sources: Seen Alpha; Roku This autumn 2022 account estimate; Roku This autumn 2021 and This autumn 2020 account figures

The Key Metric: Lively Accounts

Key to Roku’s promoting enterprise is the variety of lively accounts on its platforms, a measure of the dimensions of its person base. Roku defines lively accounts because the variety of distinct person accounts which have streamed content material on its platform someday inside the previous 30 days. The corporate doesn’t distinguish between distinctive people streaming content material on the identical account, although the variety of lively accounts is carefully correlated with the variety of viewers, and thus the potential attain for advertisers.

Regardless of macro headwinds, Roku’s underlying person base is rising. The corporate stated in early January that it expects a document of over 70 million lively accounts for the fourth quarter of 2022. That is no less than 16% above 60.1 million lively accounts for the prior-year quarter.