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Why Roku Stock Was Slammed Thursday

By Daniel Sparks – Nov 8, 2018 at 12:51PM

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Massive growth wasn't enough to live up to the Street's high expectations.

What happened

Shares of Roku (ROKU -0.20%) tumbled on Thursday, falling as much as 19.2%. As of 12:09 p.m. EST, the stock was down 18.5%.

The stock's pullback follows Roku's third-quarter earnings release, which featured better-than-expected revenue and a narrower-than-expected loss per share. But Roku's third-quarter platform revenue and its fourth-quarter bottom-line guidance may have spooked some investors.

The Roku Channel displayed on a TV

Image source: Roku.

So what

For its third quarter, Roku reported revenue of $173.4 million, up 39% year over year. This was higher than analysts' consensus forecast for revenue of $169.1 million. The company's loss per share of $0.09 was narrower than a consensus analyst estimate for $0.12. 

Roku's platform revenue increased 74% year over year to $100.1 million, missing an average forecast for $103.2 million.

Now what

Roku raised its guidance for full-year revenue, citing its strong third-quarter results and higher expectations for its fourth quarter. "We now see full-year revenue growth of 42% year-over-year at the midpoint, up from 40% year-over-year provided last quarter and from 31% year-over-year when we provided our outlook at the beginning of 2018," management said in Roku's third-quarter shareholder letter.

Roku's guidance for its fourth-quarter bottom line to be between a loss of $4 million and a profit of $3 million, however, was below analysts' consensus estimate for a profit of $7 million. 

Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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