Profitability is in sight for Roku Inc (NASDAQ:ROKU) is a key takeaway for investors in the wake of Wednesday’s expectation beating financial results, that’s the view of analysts at Wedbush.
Roku stock is trading up around US$7.91 or 12.06% changing hands at US$71.12.
Fourth quarter revenue came in at US$867mln, above the US$850mln forecast by Wedbush and a lot better than Roku’s own guidance for US$800mln.
Device revenue from the sale of streaming sticks and boxes amounted to US$136mln, against a Wedbush forecast for US$146mln, whilst platform revenue totalled US$731mln beating the broker’s forecast for US$705mln.
At 70mln active users on the Roku platform it had grown by 12% over the preceding quarter and 17% year on year.
Roku had a 42% gross margin, slightly above forecast, and it reported a US$95mln EBITDA loss ahead of its own guidance for a US$135mln loss, market consensus forecasts of US$130mln and Wedbush’s forecast of US$117mln.
The streaming tech firm gave first-quarter guidance pitched at US$700mln for revenue, US$310mln of gross profit, and an EBITDA loss of US$110mln. Roku held off from giving full-year 2023 guidance, but, told investors it expects to turn into positive EBITDA in 2024.
Wedbush has an ‘outperform’ rating with a 12-month price target pitched at US$80, suggesting a further 12% upside to the current price of US$71.40.
“Roku is building its platform for global dominance, and is in the heavy investment phase,” Wedbush analyst Alicia Reese said in a note.
“During the pandemic we got a glimpse of the significant leverage Roku has in its model, and as we exited the pandemic Roku resumed its international expansion and launched various devices.
“Meanwhile, the weak advertising market is tempering industry results, particularly for newer ad-based companies like Roku more exposed to scatter demand.”
Reese added: “Inflation pressured smart TV sales in Q4, but value-priced smart TVs like Roku's were a relative bright spot.
“Even in a difficult macroeconomic environment, Roku added over 5 million active accounts in Q4:22 vs. fewer than 4 million in Q4:21.”