Roku (NASDAQ:ROKU) stock is trending on social media today on news that the company will cut 10% of its staff and conduct a “strategic review” of its content in order to cut costs. The Roku layoffs will reportedly affect about 300 employees. Now, ROKU stock is rallying more than 10% in the wake of the news.
In addition to the Roku layoffs, the company is “consolidating its office space utilization” and “performing a strategic review of its content portfolio.” It’s also “limiting new hires.”
As a result of the job cuts, Roku will pay a restructuring charge between $45 million and $65 million. Additionally, its efforts to cut office space will cost between $160 million and $200 million. Meanwhile, the removal of some of its content will generate charges between $55 million and $65 million.
Financial Guidance and Results
The layoffs aren’t the only big news for Roku today. In addition, the company increased its third-quarter revenue guidance to between $835 million and $875 million, “not including impairment charges.” That outlook is up from its previous estimate for $815 million in Q3 revenue.
According to Seeking Alpha, the firm also predicts that its Q3 EBITDA, excluding certain items, will come in between -$40 million and -$20 million.
In the second quarter, Roku’s top line increased 11% versus the same period a year earlier. Its streaming hours climbed 4.4 billion hours year-over-year (YOY) as well, reaching 25.1 billion hours.
My Take on ROKU Stock
I believe that Roku, which is one of America’s most popular operating systems for streaming, will continue to grow quickly as streaming rapidly proliferates. Moreover, as fears of a recession ease further, many companies may be willing to spend much more on advertising on Roku’s platform. Indeed, Roku reported that, last quarter, consumer packaged goods and health and wellness companies spent more on ads on its platform than they did in Q1.
And of course, the Roku layoffs as well as other cost-cutting measures will raise the company’s bottom line going forward.
On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
