Roku (NASDAQ:ROKU) Releases Quarterly Earnings Results, Beats Estimates By $0.65 EPS

Key Points

• Roku significantly beat quarterly expectations: EPS came in at $1.20 versus the $0.55 consensus, while revenue reached $1.50 billion, up 24.1% year over year and above the $1.41 billion estimate.
• Advertising growth drove profitability: Advertising revenue increased 23%, while stronger margins and lower marketing costs helped net income rise roughly sevenfold to about $183 million.
• The pending Fox acquisition remains a key catalyst: Fox reportedly secured all required foreign regulatory approvals for its approximately $22 billion purchase of Roku, although Roku is withholding forward guidance and will not hold an earnings call during the transaction.

Roku (NASDAQ:ROKU - Get Free Report) announced its earnings results on Monday. The company reported $1.20 earnings per share (EPS) for the quarter, topping analysts' consensus estimates of $0.55 by $0.65, FiscalAI reports. The firm had revenue of $1.50 billion for the quarter, compared to analyst estimates of $1.41 billion. Roku had a net margin of 6.82% and a return on equity of 13.73%. Roku's revenue was up 24.1% compared to the same quarter last year. During the same quarter last year, the business earned $0.16 earnings per share.

Roku Stock Performance

Shares of ROKU stock opened at $155.52 on Tuesday. The firm has a market capitalization of $23.08 billion, a price-to-earnings ratio of 63.66 and a beta of 2.05. The company has a 50 day moving average price of $155.11 and a 200 day moving average price of $127.79. Roku has a one year low of $78.53 and a one year high of $160.22.

Roku News Summary

Here are the key news stories impacting Roku this week:

• Positive Sentiment: Large Q3 earnings and revenue beats: Roku reported approximately $1.20 in adjusted EPS, more than double the $0.55 analyst consensus, while revenue reached $1.50 billion versus expectations of $1.41 billion. Revenue increased 24.1% year over year, and earnings rose sharply from $0.16 a year earlier. Roku quarterly earnings report
• Positive Sentiment: Advertising performance supported profitability: Advertising revenue grew 23%, with improved gross margins allowing Roku to retain more profit from each advertising dollar. Lower marketing expenses also contributed to a roughly sevenfold increase in net income, reported at about $183 million. Roku advertising and profit growth article
• Positive Sentiment: Fox acquisition is progressing: Fox has reportedly received all required foreign regulatory approvals for its approximately $22 billion acquisition of Roku, narrowing the deal spread and reducing a key execution risk. Roku Fox acquisition regulatory approval article
• Neutral Sentiment: Limited forward guidance: Because of the pending Fox transaction, Roku will not host an earnings call or provide financial outlook. This makes near-term valuation and expectations more dependent on reported results and merger developments. Roku third-quarter financial results
• Negative Sentiment: Higher costs are expected: Roku indicated that marketing expenses should increase in the fourth quarter, potentially limiting the pace of margin expansion after the strong Q3 performance. The company is also removing a popular feature, which could create some customer dissatisfaction, although the financial effect appears limited. Roku feature removal article

Wall Street Analyst Weigh In

A number of research analysts have weighed in on ROKU shares. Citigroup increased their price target on Roku from $120.00 to $157.00 and gave the stock a "neutral" rating in a research note on Friday, July 17th. UBS Group lifted their price objective on Roku from $126.00 to $172.00 and gave the company a "neutral" rating in a research report on Friday, August 7th. Weiss Ratings raised Roku from a "hold (c)" rating to a "hold (c+)" rating in a research report on Thursday, October 8th. Needham & Company LLC reiterated a "buy" rating on shares of Roku in a research note on Friday, August 7th. Finally, Fox Advisors set a $157.00 target price on Roku in a research report on Friday, July 17th. One investment analyst has rated the stock with a Strong Buy rating, seven have issued a Buy rating and eighteen have assigned a Hold rating to the stock. Based on data from MarketBeat, Roku currently has a consensus rating of "Hold" and an average target price of $156.17.

Insider Activity at Roku

In related news, CFO Dan Jedda sold 7,000 shares of the stock in a transaction dated Thursday, October 15th. The stock was sold at an average price of $152.84, for a total value of $1,069,880.00. Following the completion of the transaction, the chief financial officer owned 67,811 shares of the company's stock, valued at approximately $10,364,233.24. This represents a 9.36% decrease in their ownership of the stock. The sale was disclosed in a document filed with the SEC, which is accessible through this link. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. Also, insider Gilbert Fuchsberg sold 4,824 shares of the stock in a transaction on Wednesday, September 2nd. The stock was sold at an average price of $155.64, for a total transaction of $750,807.36. Following the sale, the insider directly owned 40,168 shares in the company, valued at $6,251,747.52. This trade represents a 10.72% decrease in their ownership of the stock. The SEC filing for this sale provides additional information. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. The sale was made to cover tax withholding obligations related to the vesting of equity awards. Over the last three months, insiders sold 96,195 shares of company stock worth $14,854,525. 13.45% of the stock is owned by corporate insiders.

About Roku

Roku, Inc NASDAQ: ROKU operates a television streaming platform that connects consumers with digital entertainment. The company develops and licenses Roku OS, an operating system for smart televisions and streaming devices, and offers Roku-branded streaming players, Roku TVs, audio products and related accessories.

Roku also operates a platform business that distributes streaming content through its interface and supports content discovery, subscriptions and digital advertising. Its services include The Roku Channel, which provides a selection of ad-supported and premium entertainment, as well as tools that enable content providers and advertisers to reach streaming audiences.

Founded in 2002 by Anthony Wood, Roku initially became known for its streaming players and later expanded through partnerships with television manufacturers.