Roku Stock Continues To Rise Before Earnings!

ROKU unveils OneView Ad Platform!

Reveals Sneak Look At First-Quarter Update!
Stock Options Made Easy Members Already Up 100%!
More To Come.

by Ian Harvey
May 06, 2020

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Roku stock jumped 38.6% in April. Earnings are expected on Thursday, May 07, after the market closes.

 The consensus estimate is for a loss of $0.45 per share on revenue of $296.58 million; but the Whisper number is a little better at ($0.41) per share.

The company's guidance was for revenue of $300.00 million to $310.00 million. Consensus estimates are for earnings to decline year-over-year by 400.00% with revenue increasing by 43.51%.

And, Stock Options Made Easy “Earnings Predictions” Members are already up potential profits of 100% based on a CALL OPTIONS trade.


Roku Inc. (NASDAQ: ROKU)

Roku stock jumped 38.6% in April. On April 14 Roku provided investors with a sneak look at their first-quarter update.

Due to the coronavirus crisis Roku's share price dropped 53% before finally reversing course and recovering to a degree. As of now, the stock price is still down 15% for the year. 

Roku said it expects ad revenue to pull back in the near term due to coronavirus crisis pressures on marketers' budgets, but long-term advertising revenue is forecast to be a major bright spot. When first-quarter earnings are released, Roku expects revenue to be slightly higher and other metrics generally in line with earlier guidance.

Roku estimates that it finished March with 39.8 million active accounts, a net increase of almost 3 million accounts since the end of December. It also expects first-quarter streaming hours of 13.2 billion, 49% higher than a year earlier.

The Recommended Roku Stock Trade Provided Monday.....

The Los Gatos, California-based TV streaming device giant Roku Inc. (NASDAQ: ROKU) will report earnings after the market closes on Thursday, May 07, 2020. The consensus estimate is for a loss of $0.45 per share on revenue of $296.58 million; but the Whisper number is a little better at ($0.41) per share.

The company's guidance was for revenue of $300.00 million to $310.00 million. Consensus estimates are for earnings to decline year-over-year by 400.00% with revenue increasing by 43.51%.

The company is also expecting gross profit from $139 million to $144 million, and a net loss of $60 million to $55 million. Adjusted EBITDA was set at -$23 million to -$18 million.

The company withdrew its 2020 guidance amid coronavirus uncertainty, which CEO Anthony Wood addressed:

“We have been working closely with advertisers to help update their plans to reflect new viewing patterns and adjust their overall marketing mix which has been affected by social distancing. While we expect some marketers to pause or reduce ad investments in the near term, we believe that the targeted and measurable TV ads and unique sponsorship capabilities that Roku offers are highly beneficial to brands today.

Roku stock rose 10% on the update.”

Roku reported on April 14 that it added nearly 3 million new accounts in the first quarter, with total streaming hours increasing by 49% year-over-year to 13.2 billion hours.

While Roku stock may see some challenges with advertisers in the near-term, the reality of advertising is that as long as you have an audience, you’ll have an attractive platform for ad buys. Roku is doing its part with its customer growth and increase in streaming hours.

That should help the company advance toward its goal of profitability. Roku says it had $587 million in cash, cash equivalents, or short-term investments at the end of the first quarter, including drawing down $70 million from a revolving credit facility.

As social distancing guidelines stretch into the second quarter, you can expect Roku to continue its growth path.

Analysts’ Opinions.....

Benchmark analyst Daniel L. Kurnos initiated coverage of Roku with a Buy rating and $153 price target last week.

“Roku stock is insulated from broader advertising pressure in the near term and is a significant beneficiary of any recovery in the cost of ad impressions,” Kurnos said in the Wednesday initiation note.

“The company may face revenue share pressure over time, but could continue to benefit from subscription-video-on-demand channel growth, the analyst said. This may be accompanied by significantly lower unsubscribe exposure due to Roku’s free price tag,” he said.

Kurnos expects Roku to win with or without the coronavirus. Even if this phase extends, almost half of Roku’s advertising revenue is locked-in via upfront contracts, and over 40% impression growth and a shift to video will help offset any dramatic decline in the cost of ad impressions, the analyst said.

A continued pandemic environment could create subscriber tailwinds with a rise in jobless claims, he said.

If the pandemic is quickly resolved, it could result in a sharp rise in ad trends, according to Benchmark.

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Influencing Factors……

Roku's advantage over other streaming services is that it provides access to both free and paid content, making it more likely that accounts it adds during the pandemic will remain active after the crisis. 

Earlier this year, Roku began its expansion into emerging markets by entering Brazil. Strategically, Roku has partnered with the electronics company AOC to launch AOC Roku TV. The AOC TV/Roku platform will feature popular local content from Globoplay. With over 5,000 channels and over 1,000 free channels, Roku should do well in emerging markets.

Roku has announced fifteen TV brands that come integrated with the Roku platform models. These models are available not only in the U.S., but also in the UK, Canada, and Mexico as of 2020. This kind of strategic partnership with TV models will help the company scale globally, which is a critical next step for Roku stock.

For every new market Roku expands into and every unit sold, these numbers will only increase with Roku’s brand and helps diversify the company from varying levels of ad demand.

OneView Ad Platform To Boost Roku Stock.....

Roku unveiled OneView Ad Platform yesterday, which is a single platform leveraging TV identity data from the No. 1 TV streaming platform in the US to manage advertising — across OTT, desktop and mobile campaigns — that reaches an estimated four in five homes in the U.S.

OneView Ad Platform integrates the reach, inventory, and capabilities of Roku advertising with the identity and attribution tools of demand-side platform dataxu, which the company acquired in November 2019.

"Our goal is to help advertisers and content partners invest for a world where all TV is streamed," said Scott Rosenberg, Senior Vice President and General Manager, Platform Business at Roku. "OneView provides the data and scale across the entire TV landscape so marketers can plan, buy and measure TV advertising and ultimately shift spend to streaming more quickly."

"We’re shifting traditional TV budget to OTT and now manage it all in OneView because we can leverage our own data at scale and quickly respond to changes in the market," said Rhasaan Wilks, Performance Marketing Manager at Giant Eagle.

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Moving Forward for Roku Stock.....

COVID-19 offers an important opportunity for Roku stock as OTT usage is skyrocketing and the company must expand globally for long-term growth.

Roku predicts that by 2024, roughly half of all U.S. TV households will have cut the cord or never had traditional pay-TV.

Analysts’ Reactions......

Needham analyst Laura Martin said Roku stock may be able to withstand the storm with its unique model. “A key thing that differentiates Roku in this environment is that it doesn't set its ad-prices at auction,” Martin said in a Tuesday note. “It uses a direct sales force to set negotiated prices, just like traditional linear-TV. We believe that, even though ad-demand has been falling, Roku is still charging $30 + CPMs, and instead, is cutting the number of ads it runs per hour.”

Any weakness in Roku’s price will likely be temporary, considering its financials and positioning. Although you could argue this is the case for many advertising companies, connected TV ads are in a growth trend while mobile is reaching saturation.

Among the 21 analysts covering Roku stock, 14 recommend a “buy,” five recommend a “hold,” and two recommend a “sell.” Analysts have an average target price of $128.28 on Roku.

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So…..

Roku stock gained 9.02% on Monday and closed the trading day at $124.30. At Monday’s closing price, the company’s market value was around $15 billion. Currently, Roku stock is trading at a 29.6% discount from the 52-week high of $176.55. The shares are trading at a premium of 113.5% from the 52-week low.

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AS ALWAYS THE DECISION IS YOURS!


An Important Note: That any suggestions for options trade considerations require investors/traders to use their own discretion as to when to enter or exit! As well, it is advisable to do further research and due diligence before executing your trade.

It is sometimes best to exit a trade, if there is already sufficient profit accrued, before an earnings report is presented. GREED can be the undoing of a nice profit!


Best of Trading,
Ian Harvey
Director of Stock Options Made Easy


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