Please ensure Javascript is enabled for purposes of website accessibility

7 Metrics Behind Roku Inc.'s Soaring Stock Price

By Daniel Sparks - Nov 9, 2017 at 10:36PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Roku just totally crushed investor and analyst expectations. Here's what you should know.

It's fair to say that expectations were high ahead of Roku's (ROKU 7.11%) first reporting period as a publicly traded company. Shares were trading at $19 in the trading day before it reported its third-quarter results -- up 36% from Roku's $14 price in its initial public offering. Analysts were expecting strong double-digit top-line growth.

But the set-top streaming video player company delivered -- and then some. Not only did revenue growth come in far higher than analysts were expecting, but Roku also reported a narrower-than-expected loss, soaring growth in gross profit and active accounts, and a range of other impressive stats.

The Roku Channel displayed on a TV

Image source: Roku.

The quarter's expectation-crushing results sent the stock through the roof. Shares are up about 45% at the time of this writing, trading above $27. Here are some of the key metrics highlighting Roku's better-than-expected performance.

40% growth in revenue

Roku's third-quarter revenue surged 40% year over year to $125 million. Not only did this handily exceed a consensus analyst estimate for third-quarter revenue of $110 million, but it also marked a significant acceleration compared to Roku's 23% year-over-year revenue growth in the first half of the year.

137% growth in platform revenue

The better-than-expected revenue for the internet set-top box company was driven primarily by a 137% year-over-year increase in platform revenue, or revenue earned from monetizing the ways users engage with the content on Roku's platform. This triple-digit rise was a notable acceleration from the 91% year-over-year growth in Roku's platform revenue in the first six months of the year.

Roku said its advertising business, which more than doubled in size year to date, played a key role in fueling this growth. "Our penetration with TV advertising buying teams continues to grow as a share of our overall business," Roku said.

48% rise in accounts

Growth in Roku's platform was also driven by a 48% year-over-year rise in active accounts. Roku's active accounts by the end of the quarter now amount to 16.7 million, up from 11.3 million in the year-ago quarter. Roku has scaled its active accounts both by selling its streaming players, and by licensing its platform to TV manufacturers and operators.

4% growth in hardware revenue

Revenue in Roku's player segment -- its hardware sales -- increased 4% year over year. While this isn't much, it's much better than Roku's 2% year-over-year decline in player revenue in the first six months of 2017. The growth is also notable since Roku openly states that it doesn't focus on maximizing hardware revenue, instead opting to optimize its business around increasing unit sales and active accounts.

35% rise in unit sales

Player unit sales increased 35% year over year, demonstrating Roku's ability to get units into the hands of customers. Roku did this by selling lower-priced units like its $29.99 Roku Express, which management said "has seen tremendous success."

$0.10 loss per share

With rapidly rising sales in its more profitable platform segment, Roku's adjusted loss per share narrowed from $0.17 in the year-ago quarter to $0.10 in Q3.

92% increase in gross profit

Combining Roku's impressive 72% gross profit margin for its platform segment with a 137% year-over-year increase in platform revenue, the company's gross profit skyrocketed 92% year over year to $49.9 million.

A look at Roku's third-quarter report gives investors reasons to be more confident. The quarter proves Roku can easily scale operations as revenue increases. Profitability, therefore, is likely just around the quarter. Indeed, Roku said its adjusted EBITDA could break even as early as the end of the year.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Roku Stock Quote
Roku
ROKU
$84.79 (7.11%) $5.63

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
322%
 
S&P 500 Returns
116%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/25/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.