Inside the Numbers
In Q4, Roku topped Wall Street expectations for sales and earnings and issued forecast above expectations. The company reported $0.49 per share in earnings, while analysts were expecting a loss of $0.05 per share. Revenue was $649.9 million, while analysts were expecting $617.7 million. In Q4 2019. Roku lost $0.13 per share on revenue of $411.2 million.
This marks Roku's first profitable quarter as the company has been in growth mode as it is investing in international expansion and its ad-supported video-on-demand (VOD) services. The company's growth was certainly facilitated by the coronavirus which caused an uptick in the time people spent at home watching streaming content.
In Q1 2021, Roku forecasts revenue of $485 million, a 51% increase from last year. Analysts were expecting $463 million. The company also said that its advertising business was strong in Q4 as total ad impressions doubled on a year-over-year basis. They also said that the average revenue per user increased by 24% year over year to $28.76. Most of Roku's revenue comes from ad revenue.
Stock Price Outlook
Roku is certainly in the category of frothy, high-growth, tech stocks. Currently, it has a $47 billion market cap and $1.5 billion in sales. Additionally, the company's growth is slowing, and there are concerns that it could underwhelm compared to 2020's inflated numbers.
With long-term rates rising, it's starting to put pressure on high-multiple stocks. So far, Roku is down nearly 20% from its highs, yet it remains more than 500% above its March 2020 lows around $60.
While many growth stocks have been underperforming for many months, Roku is an exception as it's steadily been making higher highs and higher lows since March 2020. In part, this is due to many believing that the streaming trend is insulated from the economy returning to normal.
However, there's good reason to be cautious on shares over the next couple of months as interest rates are likely to keep rising given the passage of fiscal stimulus and economic activity being unleashed when the economy reopens.