Why Roku Inc (NASDAQ: ROKU) stock is rising

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Roku Inc (NASDAQ: ROKU) stock rose over 2.6% on 14th Feb, 2020 (As of 10:40 am GMT-5; Source: Google finance) after the company posted better than expected results for the fourth quarter of FY 19. The company benefited from the launch of new streaming services from Walt Disney and Apple. Roku has reported adjusted earnings before interest, taxes, depreciation and amortization (Ebitda) of $15.1 million, down from $24.5 million a year earlier, but ahead of the FactSet consensus, which projected $12 million. The company had 36.9 million active accounts, which is an increase of 4.6 million from last quarter. Streaming hours grew to 11.7 billion, up 60% from a year earlier. During the year 2019, the company saw more than 40 billion hours streamed.

Moreover, Roku has shifted its focus from device sales to advertising, which is now the company’s fastest-growing revenue stream, to tap the jump in number of streaming services providers. Advertising is one of the biggest opportunities for Roku as the viewership moves from traditional TV to streaming. The company charges a commission from media companies that stream programming on the free, ad-supported Roku channel. The platform monetization continued to increase with ARPU up to $23.14 (on a trailing twelve months basis), which is up 29% year-over year, as the company continued to grow video advertising impressions across the platform, including on The Roku Channel. For Q4 and full year 2019, Roku monetized video advertising impressions have more than doubled year-over-year.

ROKU in the fourth quarter of FY 19 has reported the adjusted loss per share of 13 cents, which is in line with the analysts’ estimates for the adjusted loss per share of 13 cents, according to analysts surveyed by FactSet. The company had reported the adjusted revenue growth of 49 percent to $411.2 billion in the fourth quarter of FY 19, beating the analysts’ estimates for revenue of $392 billion. Revenue consisted of $151.6 million in player revenue and $259.6 million in platform revenue, which includes advertising benefits and cuts of streaming subscription fees.

Roku expects full-year revenue to be in the range of $1.58 billion and $1.62 billion, while analysts were expecting $1.58 billion, according to IBES data from Refinitiv. The company expects total gross profit to grow slightly faster than revenues to approximately $730 million, 47% year-over-year growth at the midpoint.

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