Roku Plunges After Reporting Weak Ad Revenue

^{Source: Predictions based on analysts’ consensus from Visible Alpha}

Roku (ROKU) Financial Results: Analysis

Roku Inc. (ROKU), among the top eight entertainment platforms in the U.S., lost a fifth of its market value after saying revenue and advertising spending slowed in the third quarter.

The shares slid after Roku reported revenue grew by 12% to $761,4 million, the slowest pace in more than six years. The company lost 88 cents a share, less than the $1.24 per share that analysts estimated.

Roku blamed an ad market hamstrung by the cooling economy for a slowdown in ad sales on its platform. It isn’t alone: Netflix Inc. (NFLX) plans to launch a version of its platform with ads early this month. While Roku’s products are used to stream Netflix, analysts don’t expect Roku to reap the benefits of an uptick in ad sales for the new product.

ROKU Active Accounts

Active accounts, a gauge of Roku’s user base, grew by 2.3 million sequentially to 65.4 million, topping expectations. More subscribers mean more people who will see ads, making the platform more attractive to advertisers.

ROKU Outlook and Stock Performance

Roku said it expects consumer discretionary spending and advertising budgets to remain depressed through the end of the year, resulting in player and platform revenue lower than the fourth quarter of last year. It forecast revenue next quarter of $800 million.

Roku’s stock has dropped by 83% in the last year, compared with a decline of 19% in the S&P 500 Index.

Roku’s next earnings report (for Q4 FY 2022) is expected to be released on Feb. 16, 2023.