Roku (NASDAQ:ROKU) Stock Price Up 3.1% After Earnings Beat

Key Points

• Roku beat quarterly expectations: EPS was $1.20 versus the $0.55 consensus, while revenue reached $1.50 billion, up 24.1% year over year and above estimates.
• Shares rose 3.1% after the results, trading around $160.36; advertising revenue grew 23%, and lower marketing spending helped boost earnings.
• Analyst sentiment remains mixed: MarketBeat’s consensus rating is “Hold” with a $156.17 price target, while Fox’s pending $22 billion acquisition of Roku continues through its closing process.

Roku, Inc. (NASDAQ:ROKU - Get Free Report) shares were up 3.1% during mid-day trading on Tuesday following a stronger than expected earnings report. The stock traded as high as $161.26 and last traded at $160.36. 3,848,530 shares changed hands during trading, an increase of 18% from the average daily volume of 3,273,656 shares. The stock had previously closed at $155.52.

The company reported $1.20 earnings per share (EPS) for the quarter, beating the consensus estimate of $0.55 by $0.65. The firm had revenue of $1.50 billion for the quarter, compared to analyst estimates of $1.41 billion. Roku had a net margin of 6.82% and a return on equity of 13.73%. Roku's revenue was up 24.1% on a year-over-year basis. During the same period in the previous year, the firm earned $0.16 EPS.

Key Stories Impacting Roku

Here are the key news stories impacting Roku this week:

• Positive Sentiment: Q3 results beat expectations: Roku reported $1.20 per share versus the $0.55 consensus, while revenue rose 24% year over year to $1.5 billion, topping estimates. Net income reached $183 million. Article: Roku Sees Soaring Sales, Net Income of $183M, As It Blasts Past Analyst Expectations
• Positive Sentiment: Advertising performance improved: Advertising revenue grew 23%, and the business retained more revenue as gross profit. Lower marketing spending also helped lift earnings, although Roku expects higher costs in the fourth quarter. Article: Roku's Ads Drive a 7-Fold Jump in Profit
• Positive Sentiment: Unusually high call-option volume may reflect bullish investor positioning: traders bought 12,705 calls, 179% above the average volume of 4,546. Options activity is not a guarantee of future performance.
• Neutral Sentiment: Fox acquisition remains in progress: Fox has received all foreign regulatory approvals for its pending $22 billion acquisition of Roku, narrowing the deal spread. The transaction is still subject to the remaining closing process. Article: Roku/Fox deal spread narrows after Fox says it received all foreign regulator approvals
• Negative Sentiment: Rosenblatt Securities downgraded Roku from “buy” to “neutral” and set a $160 price target, which is close to the recent share price and could limit perceived upside. Article: Roku downgraded by Rosenblatt Securities

Analyst Upgrades and Downgrades

Several equities analysts have recently commented on the stock. UBS Group upped their price objective on shares of Roku from $126.00 to $172.00 and gave the stock a "neutral" rating in a report on Friday, August 7th. Zacks Research upgraded Roku from a "hold" rating to a "strong-buy" rating in a research note on Tuesday, August 11th. Fox Advisors set a $157.00 price objective on Roku in a report on Friday, July 17th. Guggenheim lowered shares of Roku from a "buy" rating to a "neutral" rating and raised their price objective for the company from $145.00 to $160.00 in a research note on Friday, August 7th. Finally, Wells Fargo & Company lowered shares of Roku from an "overweight" rating to an "equal weight" rating and reduced their target price for the stock from $167.00 to $165.00 in a report on Friday, August 14th. One research analyst has rated the stock with a Strong Buy rating, seven have given a Buy rating and nineteen have issued a Hold rating to the company. According to data from MarketBeat.com, the company currently has an average rating of "Hold" and a consensus target price of $156.17.

Insiders Place Their Bets

In related news, SVP Christopher T. Handman sold 2,999 shares of the company's stock in a transaction that occurred on Wednesday, September 2nd. The shares were sold at an average price of $155.64, for a total transaction of $466,764.36. Following the sale, the senior vice president directly owned 8,997 shares in the company, valued at approximately $1,400,293.08. This represents a 25.00% decrease in their ownership of the stock. The transaction was disclosed in a filing with the Securities & Exchange Commission, which is accessible through the SEC website. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. The sale was made to cover tax withholding obligations related to the vesting of equity awards. Also, insider Mustafa Ozgen sold 3,410 shares of the firm's stock in a transaction that occurred on Wednesday, September 2nd. The shares were sold at an average price of $155.64, for a total transaction of $530,732.40. Following the completion of the sale, the insider directly owned 25,569 shares in the company, valued at approximately $3,979,559.16. This trade represents a 11.77% decrease in their position. The SEC filing for this sale provides additional information. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. The sale was made to cover tax withholding obligations related to the vesting of equity awards. In the last ninety days, insiders have sold 96,195 shares of company stock worth $14,854,525. Corporate insiders own 13.45% of the company's stock.

Institutional Inflows and Outflows

Institutional investors and hedge funds have recently added to or reduced their stakes in the company. Arrowstreet Capital Limited Partnership raised its holdings in Roku by 229.5% during the first quarter. Arrowstreet Capital Limited Partnership now owns 2,038,347 shares of the company's stock worth $192,868,000 after purchasing an additional 1,419,772 shares in the last quarter. HBK Investments L P purchased a new stake in shares of Roku during the 2nd quarter worth approximately $163,604,000. Janus Henderson Group PLC lifted its position in shares of Roku by 1,320.4% during the 1st quarter. Janus Henderson Group PLC now owns 834,619 shares of the company's stock worth $78,967,000 after buying an additional 775,861 shares during the last quarter. Bank of New York Mellon Corp acquired a new position in shares of Roku in the 2nd quarter valued at $105,216,000. Finally, Alua Capital Management LP acquired a new position in shares of Roku in the 1st quarter valued at $44,869,000. Institutional investors and hedge funds own 86.30% of the company's stock.

Roku Trading Up 3.1%

The firm's fifty day moving average price is $155.11 and its 200-day moving average price is $127.79. The firm has a market cap of $23.80 billion, a price-to-earnings ratio of 68.53 and a beta of 2.05.

Roku Company Profile

Roku, Inc NASDAQ: ROKU operates a television streaming platform that connects consumers with digital entertainment. The company develops and licenses Roku OS, an operating system for smart televisions and streaming devices, and offers Roku-branded streaming players, Roku TVs, audio products and related accessories.

Roku also operates a platform business that distributes streaming content through its interface and supports content discovery, subscriptions and digital advertising. Its services include The Roku Channel, which provides a selection of ad-supported and premium entertainment, as well as tools that enable content providers and advertisers to reach streaming audiences.

Founded in 2002 by Anthony Wood, Roku initially became known for its streaming players and later expanded through partnerships with television manufacturers.

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