Roku likely to report weak Q4 earnings

Roku Inc. (NASDAQ: ROKU) is set to release its fourth-quarter 2019 earnings results on Thursday after the market closes. The top line will be benefited by active accounts and streaming hours as well as average revenue per user while the bottom line will be hurt higher costs and expenses.

The company’s top-line growth is likely to come from advertising, content distribution and billing services on its platform and the sale of streaming players. The company expects that tradeoffs from player revenue and player gross profit to grow the number of players sold and grow active accounts, and to result in increased platform monetization and growth in aggregate gross profit.

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The contribution of advertising, as well as subscription and transactional video-on-demand to platform revenue, are likely to increase user engagement on its streaming platform that in turn increases its platform monetization. The company believes growth rates of streaming hours in 2020 are likely to be lower than last year despite active accounts and user engagement driving robust growth in aggregate streaming hours.

The company continues to face immense competition in the TV streaming space from the giants Netflix (NASDAQ: NFLX) and Amazon (NASDAQ: AMZN). Also, the penetration of new and growing companies in the market could turn fatal for Roku during this year. Meanwhile, market experts fear that a change in users’ habits could decelerate the subscribers’ growth rate in the future.

Analysts expect the company to report a loss of $0.14 per share on revenue of $391.61 million for the fourth quarter. In comparison, during the previous year quarter, Roku posted a profit of $0.05 per share on revenue of $275.74 million. The company has surprised investors by beating analysts’ expectations in all of the past four quarters.

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For the third quarter, Roku reported a wider loss due to higher costs and expenses despite a 50% jump in the top line. Platform revenue soared by 79% and player revenue increased by 11%. Active accounts grew 36% year-over-year to 32.3 million while streaming hours increased 68% to 10.3 billion. The average revenue per user (ARPU) increased by 30% to $22.58.

For the fourth quarter, the company expects revenue in the range of $380-396 million and net loss in the range of $22-17 million. Gross profit is predicted to be $156-161 million and adjusted EBITDA is projected to be $7-12 million.

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