Roku Earnings - What Could Go Right, What Could Go Wrong
Roku Earnings - What Will Move The Market
Date Published: 2019-04-20
Disclaimer
The information contained on this site is provided for general informational purposes, as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation. Consult the appropriate professional advisor for more complete and current information. Capital Market Laboratories (The Company) does not engage in rendering any legal or professional services by placing these general informational materials on this website.Preface
These are the numbers that will move the market for Roku, and the guidance that will move it as well. In the final section we cover the details of what could go right and wrong in great detail.
Current Quarter Analyst Estimates
| Revenue | $189.86 Million |
| Adjusted EPS | -$0.24 |
For the bullish view, the following numbers would constitute a large beat:
* If ROKU reports a revenue number above $195.5 Million, that would be ahead of even the highest estimates.
* If ROKU reports an EPS number above -$0.13, that would be ahead of even the highest estimates.
Next Quarter Analyst Estimates
| Revenue | $217.79 Million |
| EPS | -$0.22 |
For the bullish view on guidance for the next quarter:
* If ROKU guides revenue above $230.61 Million, that would be ahead of even the highest estimates.
* If ROKU guides EPS above -$0.11, that would be ahead of even the highest estimates.
Details
What could go right: This stock has its haters, it really does. It does a lot of its business in competition with favorite technology companies like Amazon and Apple and the brand has the most cognition in the middle of the country -- far away from New York City's analysts. That means the bar is low.If Roku delivers another quarter like it did last time around, and simply reiterates guidance of $1 billion in revenue for the year the stock will do just fine. If it shows stronger average revenue per user (ARPU) than expected or beats on the estimates for new accounts, it could absolutely soar.
The advertising market, called linear TV is enormous. The linear TV advertising market, globally, is at over $200 billion. Here is the chart from Statista.
TV advertising expenditure worldwide is expected to grow to $228.8 billion. The portion of that in the United States is forecast at about $75 billion.
But, pay TV (aka cable TV) subscriptions are plummeting.
Here is the cord cutting trend, overall:
But people are actually watching more and more video -- it's just not through the cable TV account. Here is a measure of the average weekly time spent watching video on OTT TV:
Now we have new data -- let's call it "updated" data.
For the first time ever, streaming video services are more popular than pay TV services. Deloitte and Touche did the research and they had more to say.
In another ominous sign for cable TV, 88% of millennial households reported a video streaming subscription compared to just 51% for pay TV.
So, we have not only a secular shift that is accelerating, but a generational shift that is far more abrupt than the mainstream media has been covering. At some point in the future, it is our belief that for every household in the United Sates that consumes video of some sort, it will have a streaming service.
We're talking about virtually 100% penetration.
If Roku proves it can keep grabbing this market, yeah, it has upside.
-- What could go wrong: Wall Street is ready to pounce. The finger is already on the sell button. Any kind of down guidance, I mean even if we're talking about one penny in EPS or $1 million in sales, could cause a spastic sell-off. As I said at the top: "This stock has its haters, it really does."
A miss of any sort would be followed up with calls for the end of the company, that it will be irrelevant, and everything else that sounds scary.
Commentary about Apple+ and Disney+ would be nice, especially if a bullish narrative can woven around it. Keep in mind we have this -- More Data, More Gems for Roku -- as the back drop. Let's see if all that data collection is reflected in truth by the company itself.
If there's a miss: Expect. Volatility. Expect. Fear mongering.
SEEING THE FUTURE
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As always, control risk, size appropriately and use your own judgment, aside from anyone else's subjective views, including my own.
Thanks for reading, friends.
The author is long shares of Roku at the time of this writing.
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