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Roku Stock Gains on Better-than-feared Results, Analyst Upgrades to Neutral as Risks Now Priced In -Breaking


© Reuters. Roku Stock Gains due to Better-than-expected Results. Analyst Upgrades To Neutral As Risks Are Now Priced in

Roku (NASDAQ:) Reports better-than-expected Q1 Net Revenue, pushing its shares higher by more than 5% during premarket trading

Net revenue for the company was $733.7million, an increase of 28% YoY. This is higher than consensus estimates of $720.5million. The average revenue per user was $42.91, an increase of 34% YoY. Roku also reported Q1 EBITDA of ($0.19) which was $0.01 lower than the analyst estimate ($0.18).

The total number of customer accounts active in this period was 61.3million, an increase of 14% YoY. This is consistent with the anticipated 61.4million. Roku reported 20.9 Billion streaming hours in the period, an increase of 14% YoY. It was higher than expected 20.7B.

Gross margin for the company was reported at 49.7%. That’s a decrease of 56.9% from the previous year, and is lower than the consensus estimate of 50%.

Roku is expecting net revenue to reach $805 million in Q2, which falls short of analyst expectations. While analysts expected $21.2million, adjusted EBITDA will be $0.

Company estimates that Q2 will bring in $395 million in gross profits.

Michael Nathanson, a MoffettNathanson analyst, upgraded Roku from Sell to Neutral while adding that investors know now what they’re buying. This upgrade comes at a time when shares have fallen more than 60% since Nathanson’s downgrade to Sell.

“We are moving to a Neutral rating as we believe market sentiment and forward estimates reflect a slightly more appropriate view of the company. While we were notably below consensus estimates for revenues and profits at the time of our downgrade, we are now in line with consensus expectations for Roku,” Nathanson told clients in a note.

“With that said, we still see risk to forward estimates due to the company’s expectations of accelerating 2H 2022 revenue trends, increasing content spending on The Roku Channel and macro pressures in forward ad budgets. Given the heavy round of investment spending and healthy use of stock-based compensation, Roku’s valuation on traditional metrics still looks relatively stretched,” he added.

Shyam Patil from Susquehanna also agreed with the positive assessment of Roku’s earnings, which showed that Roku performed strongly in difficult conditions.

“ROKU was able to outperform expectations in 1Q despite facing continued supply chain disruptions and new macro headwinds such as the war and rising inflation. We believe the strong results in the choppy environment demonstrate the momentum of the secular shift from linear TV to CTV, underpinning our Positive view of ROKU… We continue to see ROKU as one of the best-positioned companies to capture the massive advertising opportunity in CTV,” Patil said in a note.

By Senad Karaahmetovic