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Roku (ROKU) to Report Q2 Earnings: What's in the Cards?

Roku ROKU is set to report second-quarter 2020 results on Aug 5.

The Zacks Consensus Estimate for second-quarter revenues is pegged at $302.1 million, indicating 20.8% growth from the year-ago quarter reported figure.

Moreover, the consensus mark for loss has remained steady at 56 cents per share in the past 30 days. The estimated figure is much wider than loss of 8 cents reported in the year-ago quarter.

The company’s earnings beat the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 24.1%.

Let’s see how things have shaped up prior to this announcement.

Factors to Consider

Investor focus will be active accounts growth, which is an important metric for Roku. The popularity of its free, ad-supported platform, The Roku Channel is expected to have aided active accounts growth in the second quarter of 2020. The ability to access free and premium content on the same platform has been a huge attraction for subscribers.

In the second quarter, Roku added 30 new channels and Live TV channel guide on The Roku Channel, which is expected to have boosted user engagement amid lockdown.

The company’s active accounts jumped 37% year over year to 39.8 million in first-quarter 2020. Moreover, ARPU increased 28% to $24.35 (on a trailing 12-month basis).

Roku, Inc. Price and EPS Surprise

Roku, Inc. Price and EPS Surprise

Roku, Inc. price-eps-surprise | Roku, Inc. Quote

Management stated that acceleration in new accounts and viewership continued in April. Active accounts grew roughly 38% year over year driven by an increase in new accounts of more than 70% year over year.

Notably, the Zacks Consensus Estimate for second-quarter active accounts and ARPU is pegged at 42.54 million and $24.05, respectively, indicating an increase of 41.6% and 14.2% from the year-ago reported figure.

The expected solid surge in active accounts and viewing may be attributed to the COVID-19 outbreak that forced more and more people to stay home.

Additionally, streaming hours growth is expected to have boosted TV streaming advertising on Roku’s platform. Per management, streaming hours grew more than 80% year over year in April driven by an increase in streaming hours per account of roughly 30%.

The consensus mark for streaming hours stands at 14.96 billion, implying an increase of 59.1% from the year-ago quarter’s reported figure.

On Apr 6, The Roku Channel started streaming in the U.K., comprising more than 10000 movies, TV episodes and documentaries, which is expected to have boosted streaming hours in the to-be reported quarter. The channel is available to consumers with a Roku streaming player, Roku TV, NOW TV device or Sky Q box.

Moreover, the growing popularity of The Roku Channel is expected to have attracted advertisers in the to-be reported quarter. Also, the acquisition of Dataxu (a demand-side advertising platform) is expected to have strengthened the company’s OTT advertising roadmap.

However, management indicated that advertising business witnessed cancellations attributed to marketing budget cuts by clients due to the impact of coronavirus outbreak on businesses. Nonetheless, this was partially offset by new marketing budgets moving to Roku from traditional TV given cancellation of high profile, live sporting and entertainment event during the to-be reported quarter.

Roku announced the launch of a shopper data program to make TV advertising more precise and measurable for CPG marketers in the second quarter.

Further, the launch of streaming services — Apple TV+ and Disney+ — on Roku’s platform is expected to have aided Platform revenues, which accounted for 72.5% of revenues in the first quarter.

The consensus mark for Platform revenues is pegged at $207 million, indicating growth of 23.2% from the figure reported in the year-ago quarter.

However, the bottom line is expected to reflect the impact of cost escalations resulting from increased marketing expenses related to international expansion and content additions in the to-be reported quarter.

What Our Model Says

According to the Zacks model, the combination of a positive Earnings ESP and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.

Roku has an Earnings ESP of +34.7% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter

Stocks That Warrant a Look

Here are a few other companies, which, per our model, have the right combination of elements to post an earnings beat in their upcoming release.

Cogent Communications Holdings CCOI has an Earnings ESP of +11.66% and carries a Zacks Rank of 2, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Synaptics SYNA has an Earnings ESP of +10.6 % and currently carries a Zacks Rank of 2.

Benefitfocus, Inc. BNFT has an Earnings ESP of +6.25% and holds a Zacks Rank of 2.

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