William Blair Sticks With Roku After Negative Response To Streaming Service's Q4

Roku Inc (NASDAQ: ROKU)'s stock initially sold off around 20 percent in reaction to its fourth-quarter results Wednesday, but at least one Wall Street analyst is unconcerned and maintaining a bullish stance.

The Analyst

William Blair's Ralph Schackart maintains an Outperform rating on Roku's stock.

The Thesis

Roku's Q4 report showed that engagement "continued to strengthen" as growth in total hours streamed rose at a better pace than active account growth, Schackart said in a note. Gross profit of $73.5 million exceeded the Street's estimate of $60.8 million, likely due to a better-than-expected execution of the platform business. In fact, the company has now delivered a gross profit beat of at least 20 percent for two consecutive quarters.

The streaming video company's first-quarter guidance was mixed versus Wall Street's expectations, but gross profit guidance of $55 million at the midpoint came in slightly ahead of the Street's estimate of $53.7 million, the analyst said. The company's full-year gross profit guidance at the midpoint also came in 6 percent above the Street.

Roku's stock was hard hit after the print, mostly due to "very high expectations" from the Street and investors heading into the report, Schackart said. But after the sell-off, the stock has upside potential ahead, especially when considering expectations for 40-percent gross profit growth in 2018 and 2019, he said. 

Price Action

Shares of Roku were trading lower by 19.37 percent at $41.20 early in Thursday's trading session. 

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