Streaming Platform Roku Sees Shares Drop 20 Percent After Results That Fell Short Of Estimates

Shares of streaming company Roku were down as much as 20 percent in Thursday’s extended trading after the company issued results for its fourth quarter and revenue guidance for the first quarter, and both fell below estimates.

Roku reported earnings per share of 17 cents, adjusted, surpassing the estimate of 9 cents that analysts estimated, according to Refinitiv. The revenue reported for the quarter fell short of the estimate of analysts. While Roku reported $865.3 million in the fourth quarter, analysts had an expectation of $894.0 million, according to Refinitiv.

As seen in a shareholders letter, revenue was up 33 percent YoY in the quarter YoY. It was also up 51 percent from the third quarter and 81 percent from the first quarter.

The company issued guidance for the first quarter. Roku expects $720 million in first-quarter revenue which will imply a 25 percent growth YoY. Analysts expect first-quarter revenue of $748.5 million which surpasses what the company expects in its guidance. Roku also expects $55 million in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA). This is also below an estimate of $79.2 million by analysts, according to a consensus polled by FactSet.

While on a conference call with analysts, Roku’s Chief Financial Officer said that the company expects revenue growth in the mid-30s percentage range for the whole of 2022. According to a poll by Refinitiv, analysts expect growth to be 36 percent for all of 2022. The CFO added that the company expects EBITDA to be consistent with 2020 when it was $150 million.

In the quarter, the company reported active accounts of 60.1 million, up 17 percent YoY. It also surpassed the estimate of 59.5 million from analysts polled by StreetAccount. The number of hours from these active users, however, declined YoY.

Its Platform segment which houses digital advertising subscription and revenue sharing and sales of branded buttons on remote controls recorded revenue of $703.6 million. While it was lower than an estimate of $732.2 million from analysts, it was up 49 percent YoY. It had also grown 82 percent from the previous quarter. The category’s gross margin came in at 60.5 percent. In the third quarter, it was 65 percent.

Player revenue, from sales of streaming players and audio devices, totaled $161.7 million, declining 9% as analysts surveyed by StreetAccount had expected $162.5 million.

In the quarter, the company mentioned that it completed an agreement with Google, YouTube and YouTube TV, to keep them on its service.

Roku’s shares went down 10 percent during Thursday’s trading session in which the S&P index fell 2 percent. Roku was trading at its lowest since June 2020. While the S&PB has been down about 8 percent since the start of 2022, Roku’s stock has fallen about 37 percent over the same period.

Like other companies, Roku blames declining growth on supply shortages that affected the TV market in the US. Anthony Wood, Roku’s founder and CEO, and Steve Louden, its finance chief, wrote in the letter that “Similar to Q3, overall U.S. TV unit sales in Q4 fell below pre-COVID 2019 levels. Some of our Roku TV OEM partners were hit particularly hard with inventory challenges, which negatively impacted their unit sales figures and market share in Q4”.

They also wrote that “While we expect market conditions to result in player-related costs remaining elevated for the near term, we do not believe these conditions will be permanent”.