Roku Stock Pulls Back After Q2 Earnings: Has Streaming Growth Peaked?

It’s been a rough week for Roku Inc (NASDAQ: ROKU) investors, punctuated by a sharp drop in second-quarter streaming viewership.

On Wednesday, Roku reported second-quarter adjusted EPS of 52 cents on revenue of $645 million. Both numbers exceeded consensus analyst estimates of 13 cents and $618 million, respectively. Revenue was up 81% from a year ago.

However, Roku reported just 17.4 billion total streaming hours in the second quarter, a decline of about 1 billion hours compared to the first quarter and well short of the 19.4 billion hours analysts had expected.

Roku’s total streaming hours were up 19% in the second quarter compared to a year ago.

Roku added 1.5 million active accounts in the second quarter, bringing its total number of accounts up to 55.1 million. Average revenue per user was $38.46, up 46% from a year ago and ahead of analyst estimates of $35.30.

Related Link: 7 Uber Analysts Break Down Q2 Earnings: 'Risk Is Passing And Stock Oversold'

Voices From The Street: Morgan Stanley analyst Benjamin Swinburne said Roku is “priced for perfection as growth peaks.”

“Even with COVID comps, we are surprised international growth in [active accounts] did not have a larger impact on results this quarter or outlook for the rest of the year,” Swinburne wrote.

Rosenblatt Securities analyst Mark Zgutowicz said most of Roku’s growth numbers on the quarter were solid, especially ARPU.

“Roku posted an impressive 4th consecutive quarter of accelerating ARPU growth aided in large part to its accelerating Media and Entertainment (M&E) unit, which provides sub acquisition and retention services to SVOD/AVOD publishers,” Zgutowicz wrote.

Needham analyst Laura Martin said investors should be buying Roku shares on the post-earnings weakness.

“We believe digital markets are winner-take-most markets and ROKU is the winning AVOD aggregation platform for films and TV series,” Martin wrote.

Ratings And Price Targets:

• Morgan Stanley has an Underweight rating and a $310 target.
• Rosenblatt has a Buy rating and a $560 target.
• Needham has a Buy rating and a $550 target.

Photo: Courtesy of Roku