Roku
Overall, Roku shares are down 76% YTD with the only silver lining being that the stock is up more than 20% from its recent lows. However, it continues to underperform the major averages and has failed to participate in the recent bear market rally. It also has avoided the fate of many of the high-flying growth stocks which have fallen below their March 2020 lows and are dealing with the combination of negative cash flow, dwindling cash reserves, and a taking stock price.
Inside the Numbers
In Q3, Roku reported a loss of $0.88 per share which was better than analysts' estimates of a $1.29 per share loss. Revenue also beat expectations at $761 million vs $696 million. Overall, revenue was down by about 6% when compared to last year's Q3 due to slowing subscriber growth and less ad revenue.
Shares were lower following the company's weaker-than-expected guidance for Q4 as the company said it was feeling an impact from the slowdown in the global economy and weakness in ad spending.
As a result, it's forecasting Q4 Player and Platform revenue to decline on an annual basis. It sees $800 million and an EBITDA loss of $135 million. Both figures are lower than analysts' estimates of $899 million in revenue and an EBITDA loss of $48 million.
The company also announced that CFO Steve Louden is planning to leave the company sometime in 2023, although he will help select his replacement and be a part of the transition. Louden had previously announced that he was going to leave in 2020 but changed his plans once the pandemic hit.
From a valuation perspective, Roku still isn't too reasonable given that it has an $8 billion market cap and no pathway to becoming free cash flow positive in the future. One reason for solace for bulls is that the company has $2 billion in cash which means that it has many years of runway to figure out a strategy for this new environment.
