Roku Inc (NASDAQ:ROKU) shares are down 15% in pre-market trading after the TV maker warned it would face “difficult” growth rates in 2024, with earnings falling quarter-on-quarter due to weakness in the ad industry.
Revenues during the first quarter of 2024 are predicted to fall to US$850 million, the lowest level since the same period in 2023 but up on Wall Street estimates of US$834 million.
Underlying profits are set to fall to around the break-even level, marking a sharp switch from the ahead-of-schedule profitability achieved in the last two quarters.
In the first three months of 2023, Roku posted an underlying loss of US$69 million, before reaching profitability in the third quarter.
A loss per share of 55 cents was reported for the quarter to December, sinking lower than analysts' predictions of a loss of 52 cents per share.
An underlying profit is expected to be made for the full year of 2024, however, management did not say whether it would be above the US$4.2 million achieved in 2023.
Ad market recovery and challenges in the macro environment are said to be the causes of the slowdown in growth. Still, Roku is confident it can successfully navigate streaming trends in 2024.
A rise in live events and content available for streaming and the switch in advertising to platforms like Netflix and Amazon Prime Video have been targeted as two key trends for Roku.
“We have an inherent advantage as the programmer of the home screen to help our viewers find what they want to watch, while simultaneously growing our monetization,” the company said in its trading update.
Roku also believes as ad spending switches to streaming it will be able to capitalise, using its “tools and expertise to drive engagement” while working with its 80 million users to accelerate revenue growth.