$ROKU Explodes Through Technical Barriers Off Earnings Miss
ROKURoku Inc (NASDAQ:ROKU) shares have been on a manic run since failing to beat overly aggressive expectations in the company’s most recent quarterly report.
Roku reported strong results overall. Revenue and gross profit grew 50% as active accounts grew 36% to 32.3 mln and streaming hours grew 68% to 10.3 bln. There were a few blemishes in the report. Namely, there was not enough revenue upside and gross margins were disappointing. Third quarter revenue upside of 1% was much more muted relative to the second (11%) and first (9%) quarters.
Fourth quarter revenue guidance was only in-line with estimates. Investors wanted to see another beat and raise given the 12x forward sales multiple. What's more, third quarter gross margin fell 15 bps yr/yr to 45.7%, missing estimates. Platform gross margin pressure (-790 bps to 62.6%) came from a higher mix of video ads, which have +50% margins.
It appears that gross margin expectations got a little ahead of themselves. There isn't much clarity on the platform revenue mix. Platform revenue is generated from selling ads, revenue sharing with media companies when a consumer signs up for a streaming service on Roku, content deals, and marketing from streaming services on Roku.
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