What Happened to the Roku Stock Price Today?
- Roku (NASDAQ:ROKU) stock popped about 10% after the streaming ecosystem operator reported outstanding first quarter numbers that crushed analyst expectations on revenues and profits, and which included a way above-consensus second quarter guide.
- ROKU stock is now up more than 130% over the past year. But shares are still about 35% below their early 2021 highs.
Why It Happened
- Roku’s first quarter earnings report was an absolute killer.
- Usage was strong. Roku added 2.4 million accounts in the quarter, grew the number of accounts on the platform by 35% year-over-year, and got those folks to collectively watch 18.3 billion hours of content through Roku in the quarter (up 49% year-over-year).
- Roku monetized that increased usage better than it ever has, thanks to rebounding ad spend, new ad targeting products, and big growth from The Roku Channel.
- ARPU rose 32% year-over-year. Revenues surged 79%.
- All of this growth happened at the same time that the company’s profitability profile improved.
- Platform gross margins expanded 1,070 basis points. Player gross margins expanded 190 basis points. Total gross margins rose 1,290 basis points.
- Meanwhile, big revenue growth is driving positive operating leverage. While revenues rose 79% in the quarter, opex dollars rose just 28%, leading to 1,750 basis points of positive opex leverage.
- Adjusted EBITDA margins clocked in at a record-high 21.9%.
- All of these favorable trends are expected to persist next quarter.
- No wonder ROKU stock is surging.
Does It Matter
- This blockbuster earnings report absolutely matters to ROKU stock.
- Shares have been stuck in a downtrend for a few months, mostly driven by fear among investors that Roku would follow in Netflix‘s (NASDAQ:NFLX) footsteps and report a slowdown in user growth in early 2021 as consumers left their homes more.
- But Roku reported no such slowdown. User growth remains as robust as ever. The only difference? Roku is monetizing those users better than ever through a series of new ad products and solutions.
- Slowing growth concerns should be calmed over the next few weeks.
- They will be replaced by optimism surrounding Roku’s continued usage dominance in the secular growth streaming TV market, as well as Roku’s ever-increasing ability to monetize its users.
- ROKU stock has great potential from here.
ROKU Stock Price Forecast
- Thanks to the recent sell-off, ROKU stock is grossly undervalued today.
- Analysts think shares are worth closer to $500. We agree, based on our 10-year model on Roku.
- Once this massive growth sector meltdown eases, ROKU stock should rebound in a swift manner to the $500 level.
ROKU stock is a great play on the fact that the world is pivoting from linear TV to streaming TV. This pivot encompasses Netflix, Disney (NYSE:DIS), AT&T (NYSE:T), and so many more. By the end of the decade, everything we watch will be through the internet. Cable boxes will be as obsolete as CD players are today.
Netflix stock is the blue-chip stock to buy to play this streaming revolution. Roku stock is a higher-upside but still relatively safe bet. However, these stocks do not represent the highest upside picks in this space.
Instead, the highest upside picks in the streaming TV revolution — stocks that could soar 10X in value over the next decade — are lesser-known streaming companies that have an opportunity to turn into household ubiquities like Netflix one day.
Buying those stocks today, could be like buying Netflix stock a decade ago.
To get the names, ticker symbols, and key business details of those potential 10X stock picks, click here.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this video.
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