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ROKU to Report Q3 Earnings: Factors Influencing Results

Zacks Equity Research

Roku, Inc. ROKU is set to report third-quarter 2019 results on Nov 6.

For the quarter, the company expects revenues between $250 million and $255 million. The Zacks Consensus Estimate for revenues is currently pegged at $258.1 million, which indicates growth of 48.8% from the figure reported in the year-ago quarter.

Further, the consensus mark for third-quarter loss has been steady at 28 cents over the past 30 days.

The company’s earnings beat the Zacks Consensus Estimate in the trailing four quarters, delivering average positive surprise of 76.7%.

Investors would watch for active accounts growth, which is an important metric for Roku. In the last reported quarter, active accounts surged 39% year over year to 30.5 million. Streaming hours jumped 72% year over year to 9.4 billion. Moreover, Average Revenue per User (ARPU) increased 27% to $21.06 (on a trailing 12-month basis).

Roku, Inc. Price and EPS Surprise

Roku, Inc. Price and EPS Surprise

Roku, Inc. price-eps-surprise | Roku, Inc. Quote


Let’s see how things are shaping up prior to this announcement.

Factors to Consider

The popularity of The Roku Channel is expected to have aided active accounts growth in the third quarter of 2019.

The ability to access free and premium content on the same platform has been a huge attraction for subscribers. At the end of the last reported quarter, subscribers had access to more than 40 premium content services, including HBO, SHOWTIME, EPIX and STARZ.

Notably, the Zacks Consensus Estimate for third-quarter active accounts and ARPU is pegged at 33.28 million and $20.02, respectively.

Moreover, growing active accounts are expected to have attracted advertisers to the platform in the third quarter.

Further, Roku is enhancing the flexibility to use and access content on the platform. Compatibility with Amazon Alexa-enabled devices was a step toward this goal. The company’s ability to improve user experience is likely to have aided the top line in third-quarter 2019.

Moreover, during the quarter, the company unveiled a new streaming player lineup in addition to upgrades in Roku Express and Roku Ultra. Roku also announced new streaming stick devices and an upgrade to its operating system.

However, the bottom-line performance is expected to reflect the impact of increased headcount-related costs and facility costs, and the timing of expenses in the third quarter.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP.

Although Roku sports a Zacks Rank #1, its Earnings ESP of 0.00% makes surprise prediction difficult. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are some companies, which, per our model, have the right combination of elements to post an earnings beat this quarter:

Activision Blizzard ATVI has an Earnings ESP of +24.30% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

iHeartMedia IHRT has an Earnings ESP of +3.17% and a Zacks Rank #2.

Fox Corporation FOXA has an Earnings ESP of +2.97% and a Zacks Rank #3.

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