Roku slides on weak guidance: ‘still a good story’

Roku Inc (NASDAQ: ROKU) blew past earnings estimates in the fiscal third quarter, but shares still fell 10% after-hours on weak guidance for the holiday quarter due to supply chain issues.

Kevin Landis isn’t worried about the stock price

The stock is now down more than 30% from its year-to-date high in late July, but Firsthand Capital Management’s Kevin Landis, for one, is not worried. On CNBC’s “Closing Report”, he said:

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You want to be on the right side of streaming trends. Roku has been the place to be for years now. The stay-at-home trade helped it but also added volatility and uncertainty. Now, they had a miss and a quarter that looks chaotic, but that happens sometimes; it’s still a good story.

According to Landis, Roku is on the right track with its strategy to be “everybody’s partner and nobody’s rival”.

Q3 financial performance

Roku said its net income printed at $69 million that translates to 48 cents per share. In the same quarter last year, its net income was capped at $13 million or 9 cents per share, as per the earnings press release.

The streaming company generated $680 million in revenue that represents an about 50% annualised growth. The FactSet consensus was for 6 cents of per-share earnings on $684 million in revenue.

Active accounts and streaming hours

Roku added 1.3 million active accounts in Q3 – a slower growth than it would have expected as supply chain constraints weighed on television sales. Streaming hours came in at 18 billion versus 17.4 billion in the previous quarter.  

The California-based company noted an 82% increase in its platform revenue but player revenue tanked 26% on a year-over-year basis. Roku also disclosed that the impact of Apple’s privacy changes on its advertising business was relatively muted as it’s a first-party platform.

Guidance for the holiday quarter

For the fiscal fourth quarter, Roku now forecasts up to $75 million in adjusted EBITDA on $885 million to $900 million in revenue. In comparison, analysts are calling for $86 million in adjusted EBITDA on $946 million in revenue.

Last month, Guggenheim upgraded Roku from “neutral” to “buy” with a price target of $395 that represents an over 20% upside from where the stock closed on Wednesday.