Share This Article

Facebook LinkedIn
Twitter Reddit
Print Email
Pinterest Gmail
Yahoo
Money Morning
×
  • Invest
    • Best Stocks to Buy
    • Stock Forecasts
    • Stocks to Sell Now
    • Stock Market Predictions
    • Technology Stocks
    • Best REITs to Buy Now
    • IPO Stocks
    • Penny Stocks
    • Dividend Stocks
    • Cryptocurrencies
    • Cannabis Investing
    • AI Investing
  • Trade
    • How to Trade Options
    • Best Trades to Make Now
    • Options Trading Strategies
    • Weekly Trade Recommendations
  • Retire
    • Income Investing Guide
    • Retirement Articles
  • More
    • Money Morning LIVE
    • Special Investing Reports
    • Our ELetters
    • Our Premium Services
    • Videos
    • Meet Our Experts
    • Profit Academy
    • Postcards
Login Archives Your Team About Us FAQ
  • Invest
    • Best Stocks to Buy
    • Stock Forecasts
    • Stocks to Sell Now
    • Stock Market Predictions
    • Technology Stocks
    • Best REITs to Buy Now
    • IPO Stocks
    • Penny Stocks
    • Dividend Stocks
    • Cryptocurrencies
    • Cannabis Investing
    • AI Investing
    ×
  • Trade
    • How to Trade Options
    • Best Trades to Make Now
    • Options Trading Strategies
    • Weekly Trade Recommendations
    ×
  • Retire
    • Income Investing Guide
    • Retirement Articles
    ×
  • More
    • Money Morning LIVE
    • Special Investing Reports
    • Our ELetters
    • Our Premium Services
    • Videos
    • Meet Our Experts
    • Profit Academy
    • Postcards
    ×
  • Subscribe
Enter stock ticker or keyword
×
Join 100,000+ Like-Minded Investors Today
Twitter
Tags: Stocks

Don’t Touch Roku “Even After It’s 8.7% Earnings Beat”

By Money Morning Team, Money Morning • November 3, 2022

Start the conversation

Leave a Reply Click here to cancel reply.

You must be logged in to post a comment.

Everyone knows Roku, Inc. (NASDAQ: ROKU) these days. Whether it's a streaming player, smart TV or wireless speaker, they are in millions of households across America with over 65 million active accounts streaming 21.9 billion hours during the last quarter. That's big for any kind of company and even close to the most well-known name in streaming, Netflix. Not only in the US, they are also expanding globally and recently launched in Mexico, Germany and many other locations.

Roku may have one of the most popular streaming devices in America and If you just looked at the top line numbers you may think Roku is in a great position. In Q3'2022 they posted $761M in sales, beating its $700M guide by 8.7%, grew active accounts by 16% YoY and average revenue per user (ARPU) was $44.25, up 25.1% compounded annually over the last three years.

But that is where the good news ends for this streaming giant as costs continue to explode, leading the stock to drop over 15% after hours, even with the stock down roughly 90% from its peak in 2021.

Let's dig into the numbers.

Roku started strong out of the gate reporting total net revenue growth of 12% year over year to $761 million. While that is great that they continue to grow revenue, the key metric gross profit has seen zero incremental growth in four quarters and actually down 2% to $357m year over year. On top of that, gross profit is set to collapse to $325m based on its released guidance.

Costs have also continued to balloon with sales and marketing expenses up 91% year over year to 209.4m. R&D is also following a similar trajectory, up 73% with very little to show for it.

These costs have destroyed free cash flow for the company with net cash provided by operating activities dropping from $253.508 million down to $4.442 million. Even with revenue continuing to grow to $800 million next quarter based on Roku's estimates, net loss will still be $245 million.

Roku did mention cost cutting saying "We will continue to slow headcount and OpEx growth in response to the macro environment while continuing to make disciplined investments in our most strategic projects that will increase both the market penetration of our platform and long-term customer value." This could be too little to late given how consumer spending and advertising budgets are trending.

While Roku's business is definitely being hurt by cutbacks in advertising budgets, we are still nowhere near a bottom and that means the stock can't turn around. Cathie Woods ARK funds also owns 11.9 million shares of 9.9% of the company and if they decide to sell, it could also put more downward pressure on the stock.

Roku has been profitable in the past and until management turns the company around, it is best to stay away from this streaming player. They should have been cutting costs as interest rates continued to rise and with ad sales trending weaker than peers, it could be a rough ride for the company given the guide down during the holiday season.

 


Get the latest trading and investing recommendations straight to your inbox every Monday, Wednesday, and Friday.


 

 

Here Are 10 “One-Click” Ways to Earn 10% or Better on Your Money Every Quarter

Appreciation is great, but it’s possible to get even more out of the shares you own. A lot more: you can easily beat inflation and collect regular income to spare. There are no complicated trades to put on, no high-level options clearances necessary. In fact, you can do this with a couple of mouse clicks – passive income redefined. Click here for the report…

Claim My Free Report

Subscribe
Login
Notify of
guest

guest

0 Comments
Inline Feedbacks
View all comments


Latest News

September 14, 2023 • By Tom Gentile

Tulips Are the Secret to Trading the Next 300% Rally in AI

September 14, 2023 • By Chris Johnson

Tulips Are Telling Me How To Trade the Next 300% rally in AI

September 14, 2023 • By Garrett Baldwin

This Is My Biggest Economic Fear
Trending Stories
ABOUT MONEY MORNING

Money Morning gives you access to a team of market experts with more than 250 years of combined investing experience – for free. Our experts – who have appeared on FOXBusiness, CNBC, NPR, and BloombergTV – deliver daily investing tips and stock picks, provide analysis with actions to take, and answer your biggest market questions. Our goal is to help our millions of e-newsletter subscribers and Moneymorning.com visitors become smarter, more confident investors.

QUICK LINKS
About Us COVID-19 Announcements How Money Morning Works FAQs Contact Us Search Article Archive Forgot Username/Password Archives Profit Academy Research Your Team Videos Text Messaging Terms of Use
FREE NEWSLETTERS
Total Wealth Research Power Profit Trades Penny Hawk Midday Momentum
PREMIUM SERVICES
Money Map Press Home Money Map Report Fast Fortune Club Weekly Cash Clock Microcurrency Trader Hyperdrive Portfolio Rocket Wealth Initiative Quantum Data Profits Flashpoint Trader Darknet Alpha Accelerators Brutus Alerts Resource Traders Alliance L.A.U.N.C.H. Investor Rob Roy Trader Long-Term Equity Profits

© 2023 Money Morning All Rights Reserved. Protected by copyright of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including the world wide web), of content from this webpage, in whole or in part, is strictly prohibited without the express written permission of Money Morning.

Address: 1125 N Charles St. | Baltimore, MD, 21201 | USA | Phone: 888.384.8339 | Disclaimer | Sitemap | Privacy Policy | Whitelist Us | Do Not Sell or Share My Personal Information

wpDiscuz