Roku is set to release its Q1 2024 results later this month, and analysts are optimistic about the company’s performance. Despite challenges in the advertising market due to weak consumer spending, Roku is expected to see a recovery in Q1. Revenue is projected to reach around $950 million, up about 20% year-over-year, with net losses expected to be around $0.60 per share, slightly better than consensus estimates. Trends such as the rebound in the video advertising market and increasing engagement rates on Roku’s platform are expected to drive the company’s performance for the quarter.
Over Q4 2023, Roku’s Platform revenue saw a 10% increase compared to the previous year, with a total platform user base of 80 million active accounts, a net increase of 10 million. Despite a 4% decline in average revenue per subscriber, the company’s engagement rates have been on the rise, with total streaming hours increasing by 21% year-over-year. Roku’s devices business also saw a 15% sales expansion, despite a decline in overall TV unit sales in the U.S. due to higher LCD panel prices. The company’s proprietary streaming platform, the Roku Channel, is expected to continue gaining traction, driving higher-margin advertising revenue in the long run.
Roku has been focusing on managing its operating expenses, particularly in sales and marketing, which have been a concern for investors. In Q4, the company saw a 12% decrease in total operating expenses year-over-year. Roku also reduced its workforce by about 14% in 2023 and consolidated its office space utilization, which should help improve profitability over the quarter. Despite a sharp decline in ROKU stock from early 2021 to now, the company has shown varying returns over the years, underperforming the S&P 500 in 2021 and 2022 but outperforming in 2023. The shifting trend of ad dollars from linear television to digital video formats is likely to benefit Roku, and the stock currently trades below its peak levels in 2021.
The secular trend of ad dollars shifting away from linear television to digital video formats is likely to benefit Roku. The stock also trades at just about 2.1x forward revenue, considerably below its peak levels in 2021. Analysts value Roku stock at about $87, well ahead of its current market price of $58. With the uncertain macroeconomic environment, including high oil prices and elevated interest rates, there is speculation about whether Roku will see a similar underperformance as in 2021 and 2022 or if it will see a recovery in the next 12 months. Investors are advised to keep an eye on Roku’s Q1 2024 results to gauge its performance and prospects moving forward.
