Roku (ROKU) 1st Quarter Earnings: What to Expect

Can Roku’s (ROKU) streaming platform exist in a world where products from tech behemoths such as Apple (AAPL), Amazon (AMZN) and Google (GOOG, GOOGL) continue to grow in scale? And more importantly, can it make money?

These are the main questions Roku investors want answered when the company reports first quarter fiscal 2019 earnings results after the closing bell Wednesday. ROKU stock has skyrocketed 108% this year, crushing destroy the S&P 500’s 17% climb. The young company, which makes set-top boxes and connectivity products to stream content from the likes of Netflix (NFLX) and Hulu, has ambitions of becoming the go-to platform for TV streaming.

The stock’s impressive rise suggest investors are on-board with the company’s goals. The company is benefiting from hardware partnerships it has established with the likes of Sharp, RCA, JVC, among others. These deals have allowed Roku claim position in one out of every four Smart TVs sold in the U.S. in 2018. And with the arrival of new streaming platforms from the likes of Disney (DIS) and Comcast (CMCSA), Roku’s growth potential remains at the early stages.

All told, the company is capitalizing from the cord-cutting phenomenon, where more customers are ditching their bloated cable and satellite bundles in favor of smaller on-demand streaming options. But after robust beat-and-raise holiday quarter, which lead to a strong top- and bottom-line beat, investors will be eager to see what Roku can do for an encore Wednesday.

In the three months that ended March, the Los Gatos, Calif.-based company is expected to lose 24 cents per share on revenue of $191.97 million. This compares to the year-ago quarter when the loss was 7 cents per share on revenue of $136.58 million. For the full year, ending in December, the loss is expected to be 68 cents per share, while full-year revenue of $1.02 billion would rise 37% year over year.

The reason for the projected strong revenue numbers has to do with the fact that streaming TV content consumption more than doubled over the last 12 months, according to Conviva Data — a real-time measurement and intelligence platform for streaming TV. “The demand for streaming TV globally is growing at a stunning rate,” said Bill Demas, CEO of Conviva. “Roku and Amazon’s Fire TV are leading the connected TV charge with growth and share of engagement.”

To that end, Roku management has placed huge bets on the company’s content distribution platform, calling it the future of the business. Roku also has its sights set on international expansion, saying in the fourth quarter conference call it expects investments in international expansion to start bearing fruit next year. As with Netflix, the company said that its growing account base will be a metric for whether it makes money.

First quarter active account total is expected to rise about 35% to 28.39 million, topping last year’s mark of 20.8 million. Meanwhile, total fiscal 2019 revenue is projected to jump almost 40% to reach $1.02 billion, while revenue in 2020 is seen rising 32% higher. Some investors are understandably spooked by Roku’s valuation. But assuming the company achieves these numbers and issues confident guidance Wednesday, Roku shares could rebound to their 52-week high of $77.57 by the end of the year, delivering an additional 20%.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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Richard Saintvilus

After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.

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