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Roku misses on Q2 earnings, stock down more than 20% at open

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Yahoo Finance Live anchors discuss Roku earnings, which sent the stock tanking.

Video Transcript

- Roku shares are down 23%. The company had a weak outlook, a miss on the top and the bottom lines. The streaming device group cited challenges posed by slowing ad sales due to the current macroeconomic environment. It reported a net loss of $112 million in the second quarter. As you can see on a per share basis, that was $0.10 wider than estimated. Remember when Roku said it was going to diversify its revenue stream by leaning more into advertising? And the market was pretty happy about that strategy. Well, it's good when things are good. It's not so good one they're not.

- This was terrible. And right off the jump, I have to take a little issue here with Roku founder and CEO Anthony Wood. Hops on that earnings call yesterday and within the first five minutes is telling the Street that the fundamentals are strong. Quote, "the fundamentals are strong." No. No, they're not. Your stock is down about 25% here in the early going. It is telling you that the fundamentals of your business are starting to worsen.

And I know the team over there thinks that we're all going to be streaming stuff over the next decade. And they might be right. But for right now, the ad business is slowing down. TV sales have slowed. Roku sticks and players and content gets installed in those TVs. And that is a major problem. Now, we heard that from Best Buy. When that Best Buy earnings warning hit during the week, that was the ultimate tell that this quarter from Roku was going to really stink. And it did stink. And now they also pulled their full year financial guidance because they have no visibility into the back half of the year.

- Well, what he said is exactly counter to the second and third sentence of their own statement in their own release. Consumers began to moderate discretionary spend. Advertisers curtailed spend in the ad scatter market. TV ads bought during the quarter basically is what that means. And they expect those challenges to continue in the near term as economic concerns pressure markets worldwide.

Also, the streaming hours, the amount of hours that people are engaging with this platform, was down in the quarter by, yeah, they'll say 0.2 billion. That's 200 million hours that were not streamed during the quarter. And for every single user, that means there was at least maybe one or two movies. That's three hours for every single, what, 63.1 million users that they have right now. Three hours per user not spent on the platform. Where else do advertisers put some of that money? And does that ultimately flow into a different streaming competitor? And Netflix who's launching their own ad tier very soon as well.

- Right. That's a very good point. I mean, for some reason I have a Roku. And I say for some reason because my TV--

- It was installed with it probably.

- Doesn't need a Roku. Well, is it the Roku platform though?

- It comes pre-installed.

- But it wasn't Roku. No, no, no. I bought the Roku--

- You bought the Roku.

- --separately for some reason. But I have a smart TV. So I don't really need the Roku.

- You're double Roku'd.

- So I don't use the Roku.

- Roku squared.

- Roku squared.

- I don't know what I have. But I guess my point is that many of the new TVs now, you don't need the Roku. It's all on the TV already, right?

- Well, you know what investors have? 25% more losses here in the early going. And you look at the stock, you try to assess, well, what is this company worth, and it's completely unclear. That's why the overall company, it just might be untouchable. It's not a stock call. It's just the reality because you cannot, I think, paint a picture in your head that there is a catalyst to get sales and profits reaccelerate into the back half of the year. Everything that played out in the second quarter for Roku might just get worse in the third quarter and fourth quarter. That's why they're pulling their full year guidance.

- Well, and so that comes back to the hiring. They said that they are going to be slowing or at least decelerating some of their headcount growth as well, which is a theme that we've seen, and rightfully so probably. At this point in time, if you're seeing this type of reaction in the stock, investors clearly are looking for you to trim costs but much more aggressively. And it'll be interesting to see if we watch that directly from Roku going forward from here.