Roku Inc (ROKU-Q)

He, too, had higher hopes. If you already own, consider continuing to hold. Don't add, too many headwinds. Wants to see more consistent revenue growth, improved profitability, expanded user base. Challenging space.

ROKU operates as an operating system to consolidate all streaming providers into one platform, a very favourable market position. In the last five years, revenue growth was healthy and consistently above 20%, although it slowed down in recent quarters to around low double-digits. The balance sheet is strong, with a net cash of $1.4B compared to the market cap of $7.8B. The company has been growing strongly over the years. As a stock, ROKU’s share price has underperformed partially due to a high starting valuation. We think ROKU at the current price is quite attractive if the company can manage to continue to grow and be more disciplined on the cost side. Based on consensus estimates, sales are expected to grow by 12% on average over the next few years. It does generate good cash flow ($456M last year) and thus we would not see solvency as a concern. 
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Profitable, but has flatlined. Has all the ingredients. Dominates connected TV market with about 53% market share in NA. Having difficulty monetizing. Revenue comes from selling devices, ads, and licensing.

EPS was -35c, vs estimates of -63c. Sales were $881M vs $850M estimates. The stock is down as management noted it expects EBITDA to moderate in the second half of the year. Average revenue per user could decline. Sales did rise 19% in Q1. Though 2Q guidance was in line with consensus, it may be premature to assume pressures have eased. Tough comparisons will create 2Q headwinds and higher marketing spending will likely weigh on 2H Ebitda. Average revenue per user in 1Q improved sequentially, but there is growing competition in the connected-TV ad space, especially with the launch of Amazon Prime video ads. Comparisons are tough in part due to a cooldown in the streaming wars and a lapping of price hikes, which may crimp platform revenue gains to high-single-digits. While platform gains should accelerate in 2025, pressures may build after the Walmart-Vizio deal closes, especially in active account growth. The outlook is certainly 'less great' but with the stock decline we think this is reflected in the new valuation.
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Is surprised with how well it's doing, but people watch content by streaming, which is Roku's wheelhouse. Shares are up 50% this month, up too much for him.

The stock is trading back at levels not seen since summer 2018, but a year ago was over $500 ($70 today). Is now at lows of 2020. The bst days for Roku are behind them, and after the sell-off in recent years, Roku remains an expensive stock.

Beat handily today, but last October they guided to an 8% earnings decline, so the bar was set low. The chart is a disaster, so reporting anything less than a disaster would mean a rally.