Key Takeaways:
- After Roku reported a third-quarter earnings loss, its stock tumbled 24%.
- Sales continue to grow, although earnings hit a rough patch.
- CEO Steve Louden does not think the busy Christmas season will improve fourth-quarter earnings.
WISCONSIN (CoinChapter.com) — After Roku announced third-quarter earnings of -$0.88 per share, the stock price (Nasdaq: ROKU) plummeted from a weekly high of $58.04 down to $44.66, or 24%. The share price rebounded a bit and now trades around $49.59.
Roku management downgraded their fourth-quarter revenue outlook to $800 million – analysts expected $894 million.
Analysts had already changed their forecast, originally $1.194 billion, so the lower figure startled investors who had hoped for more from the streaming company. Economists thought the stock price would rise to $490 per share because of the pandemic.
Roku’s earnings were better than the -$1.23 consensus, but costs sent shares spiraling down.
In 2021, there was a third-quarter operating profit of $69 million; one year later, it turned into a $147 million loss. That was a step backward. Roku management said fourth-quarter losses might be -$1.75, which is nearly $0.60 worse than estimated.
Roku Sales Continue To Be Successful
Roku’s overall appeal is that their devices are a one-time buy; there are no monthly subscription fees unless one buys premium channels or programs through the service. Roku sold 2.3 million new devices during the third quarter, adding up to 65.4 million active users in the United States.
Busy Christmas Season May Not Be Enough To Boost Roku
The Christmas season historically earns retailers nearly 30% of their annual profits and far supersedes any other holiday for sales.
Roku is sold both online and in retail brick-and-mortar stores. As a result, holiday sales would be expected to increase, benefiting the company, but CEO Steve Louden does not believe prolific profits are coming this year-end.
Mr. Louden said in a letter after the earnings release:
“As we enter the holiday season, we expect the macro environment to further pressure consumer discretionary spending and degrade advertising budgets, especially in the TV scatter market. We expect these conditions to be temporary, but it is difficult to predict when they will stabilize or rebound.”
