A return to normalcy could lift Roku’s sales of ads to companies in the travel and leisure businesses.
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Fourth-quarter results from Roku, due after the close of trading on Thursday, will offer a look at how the connected-television company wrapped up a busy year, and possibly a glimpse of how management sees the post-pandemic landscape.
Roku stock (ticker: ROKU) is up about 37% year to date, and 259% in the past 12 months. Despite hits to the advertising business spurred by Covid-19, the company’s shares have soared. Roku has been a big stay-at-home winner, adding 14 million active accounts in 2020.
In addition, Roku reached deals with AT&T and Comcast to add their respective HBO Max and Peacock services to its platform last year. In January, the firm acquired content from Quibi, the defunct mobile-streaming company.
Though the company didn’t provide formal financial forecasts for its December quarter, it said in early November that it anticipated year-over-year sales growth in the mid-40% range for the last three months of its fiscal year. It said platform sales-—which includes advertising sales and Roku’s cut of certain subscriptions sold via its platform—would likely account for about two-thirds of total revenue. Sales of the devices that allow users to access its platform comprise the rest.
The consensus forecast among analysts polled by FactSet calls for a net loss of 6 cents a share during the quarter. Analysts estimate fourth-quarter sales of $615 million, up about 50% from that quarter in 2019, according to FactSet.
Despite the recent run up, 16 of the 27 analysts tracked by FactSet have Buy ratings on the stock. Only two analysts listed have Sell or equivalent ratings. That said, the mean price target on FactSet is $343.15, about 25% lower than recent levels.
The stock rallied in January, after the company provided an update on user growth. It ended 2020 with 51.2 million active accounts. Analysts also welcomed the deal to buy content from Quibi, noting at the time that such content could fare better on Roku’s free, advertising-supported channel, the Roku Channel.
Though the report will focus on the fourth quarter, analysts will likely be looking ahead. As the country reopens, streaming companies could see viewers turn off their TVs and head outdoors. On the flip side, that would be good for travel and leisure firms, many of which cut back on advertising spending in 2020. Because Roku makes money from ads on its platform, a return to normalcy wouldn’t necessarily be a bad thing.
Roku stock was down 3.1% to $455.26 on Wednesday. The S&P 500 index was down 0.1%.
Write to Connor Smith at [email protected]
