Roku reported revenue of $764.4 million in the latest quarter. Wall Street was expecting $804 million.
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Roku stock cratered after the video-streaming company’s earnings fell far short of expectations, and a Pivotal Research analyst doesn’t expect it to bounce back.
Jeffrey Wlodarczak, who rates the stock at Hold, noted that expenses are rising fast as the economy moves toward a recession, and at a time when Amazon.com and Google—rivals in the streaming business—are gaining more power. He said the stock will remain under pressure and cut his call for the price to $60 from $80, saying the shares would be fairly valued at around his new target.
Roku’s (ticker: ROKU) stock was down 24%, to $64.49, in afternoon trading on Friday. If shares close at this level, it would be the largest percent decrease on record.
The company reported a net loss of 82 cents for the second quarter after the close of trading on Thursday. The consensus call among analysts tracked by FactSet was for a loss of 71 cents a share.
“ROKU reported a frankly awful” second quarter, Wlodarczak said. “The most important question on these results is if indeed Roku (stock) is Broku.” He noted that the company’s expenses for sales and marketing rose more than 82% in the first half of 2022, while spending on research and development increased 68%. General and administrative expenses were 32% higher, he said.
The company said that it is taking steps to significantly slow growth in operating expenses, as well as slowing hiring. For the third quarter, it plans to reduce operating expenses by 10 percentage points and by 25 percentage points in the fourth quarter, according to Chief Financial Officer Steve Louden’s comment over the earnings call.
But Wlodarczak thinks that may prove difficult. For example, the company signed a long-term lease for 250,000 square feet of space in New York’s Times Square in January, when the economy was in better shape, he said.
In addition, the challenging period ahead is likely to lead to even more intense competition, and Roku’s competitors, who have posted better-than-expected results, are better positioned, he said.
Amazon’s sales increased 7% to $121.2 billion in the second quarter, while analysts tracked by FactSet expected $119.3 billion. Roku reported revenue of $764.4 million in the latest quarter. Wall Street was expecting $804 million
Write to Karishma Vanjani at [email protected]
