Roku is set to release its Q1 2024 results soon, with expectations of revenue reaching approximately $950 million, a 20% increase year-over-year. Despite challenges in the advertising market due to weak consumer spending, Roku is anticipated to see a recovery in Q1. Net losses are projected to be around $0.60 per share, slightly better than consensus estimates. The rebound in the video advertising market is likely to drive Roku’s performance for the quarter, as evidenced by a 10% increase in Platform revenue over Q4 2023.
Roku’s total platform user base has grown to 80 million, with engagement rates on its platforms seeing an increase. Total streaming hours rose by 21% year-over-year, outpacing growth in total accounts. The company’s devices business also saw a 15% sales expansion, despite a decline in overall TV unit sales in the U.S. Roku’s proprietary streaming offering, the Roku Channel, experienced a surge of over 63% in streaming hours in Q4. This trend could help drive higher-margin advertising revenue for the company in the long run.
While Roku has faced concerns over rising operating expenses, particularly in sales and marketing, the company has made progress in managing costs. Total operating expenses fell by 12% year-over-year in Q4, and the company reduced its workforce by 14% in 2023 while consolidating office space. Over a longer timeframe, Roku stock has experienced highs and lows, with a sharp decline of 80% from early 2021 levels. However, the stock outperformed the S&P 500 in 2023, indicating potential for a recovery in the future.
The shift of ad dollars from linear television to digital video formats is expected to benefit Roku in the long term. The stock currently trades at approximately 2.1x forward revenue, significantly below its peak levels in 2021. Analysts value Roku stock at around $87, well ahead of its current market price of $58. The uncertain macroeconomic environment, including high oil prices and elevated interest rates, could impact Roku’s performance in the next 12 months. However, the company’s position in the digital video advertising market suggests potential for growth and recovery.
As the market eagerly awaits Roku’s Q1 2024 results, the company’s resilience in the face of challenges in the advertising market and efforts to manage operating expenses are key factors to watch. The trends in video advertising, growth in platform user base and engagement rates, and potential for recovery in Roku’s stock price present a compelling case for investors. With a focus on the shift towards digital video formats and the company’s valuation compared to historical levels, Roku’s performance in the coming quarter will be closely monitored by analysts and investors alike.
