Cleveland Research stated on Wednesday that, thanks to linear growth, bullish TTD, CPM investment and execution, Roku's third-quarter performance may exceed market expectations.
According to the financial news app Zhitong, Cleveland Research stated on Wednesday that, thanks to linear growth, bullish TTD, CPM (cost per thousand impressions) investment and execution, the third-quarter performance of Roku (ROKU.US) may exceed market expectations.
Cleveland Research stated: "The momentum of Roku in the third quarter looks strong, thanks to the linear growth in Roku TV sales, programmatic efforts, and robust execution of the company's new products/plans - Roku is capitalizing on supply growth to win on price."
Cleveland Research stated that the outlook for this streaming device company "looks more constructive", which is determined by its new products, new advertiser revenue, lower CPM, and better agency relationships. Cleveland Research expects that most of the growth will be achieved through the Demand-Side Platform (DSP).
Cleveland Research also pointed out that M&E spending is targeting improvement, and further increases in sports/content releases are expected in the fourth quarter. Cleveland Research stated: "Roku seems to be generating wide interest, and is increasing its attractiveness to other vertical markets on the main screen and in new formats."
Roku rose 6.84% on Wednesday to $70.15. However, the stock has fallen nearly 24% year-to-date, while the S&P 500 Index has risen 15% over the same period.
Roku's second-quarter financial report, released in early August, exceeded market expectations, due to strong ad sales and continued transition to the streaming platform. The report shows that Q2 total revenue for Roku increased by 14% year-on-year to $0.968 billion, better than the analyst average expectation of $0.938 billion. Platform revenue (including digital advertising and ad-free subscriptions) was $0.824 billion, an 11% year-on-year increase; device revenue was $0.144 billion, a 39% year-on-year increase.
Gross profit was $0.425 billion, a year-on-year increase of 12%. Adjusted EBITDA was $43.6 million. Net loss was $33.953 million, compared to a net loss of $0.108 billion in the same period last year. Diluted loss per share was $0.24, lower than the analyst's average expectation of a loss of $0.34 per share. Operating expenses decreased by 2% year-on-year to $0.496 billion.
At the end of the second quarter, Roku had 83.6 million active streaming users, a net increase of 2 million from the end of the first quarter. The average revenue per user was $40.68, unchanged from the same period last year. Roku stated that the revenue growth generated from distributing and promoting streaming services on the Roku platform is faster than the overall platform revenue growth, mainly due to the increase in subscription-based application prices.
Looking ahead, Roku expects Q3 revenue to be $1.01 billion, in line with expectations. Net loss is expected to be $50 million, and adjusted EBITDA is expected to be $45 million.