Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Tech Stocks This Week: Earnings Send These 3 Stocks Lower

By Daniel Sparks - Nov 10, 2018 at 5:06PM

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

Quarterly updates last week from Square, Roku, and GoDaddy are all worth a closer look.

As earnings season continued this week, three reports were particularly interesting.

  1. Square ( SQ -0.88% ) reported another quarter of accelerating growth.
  2. Roku's ( ROKU 2.24% ) revenue surged, but at a significantly slower rate than in its previous quarter.
  3. GoDaddy ( GDDY 1.20% ) added over a million new customers while increasing average revenue per user.

Here's a look at each of these stories.

A restaurant employee interacts with Square for Restaurants platform

Image source: Square.

Square

By essentially every measure, financial-technology company Square had an excellent third quarter. Revenue surged 51%, an acceleration from 48% growth in the company's second quarter. Even more notably, the company's bottom line swung from a loss per share of $16 million in the year-ago quarter to $20 million. Further, when excluding the impact of new revenue from Square's acquisitions of Weebly and Zesty, revenue growth still accelerated compared to the prior quarter. 

One highlight from the quarter was Square's subscription and services-based revenue, which surged 155% year over year. Excluding revenue from Weebly and Zesty, this segment still saw revenue rise 117%. The steep increase was helped by strong growth from Instant Deposit, Cash Card, Caviar, and Square Capital, management said.

Even though the results were solid, shares fell about 10% on the trading day after the earnings release, because management forecast fourth-quarter adjusted earnings per share between $0.12 and $0.13, below a consensus analyst estimate for $0.15.

Roku

On the surface, streaming-TV platform company Roku seemed to have a stellar quarter as well. Revenue increased 39% year over year to $173 million, driven by a 74% year-over-year increase in platform revenue, a 43% increase in active accounts, and a 37% boost to average revenue per user.

A video screen showing The Handmaid's Tale from Hulu Live on Roku

Image source: Roku.

But Roku's $100.1 million of platform revenue, arguably the company's most important catalyst, was slightly below a consensus analyst estimate for $103.2 million. That was a stark difference from Roku's second quarter, when higher-than-expected platform revenue growth helped the company's revenue soar past estimates, rising 57% year over year. 

Roku stock fell about 20% on the day following the earnings release.

GoDaddy

For its third quarter, domain-name registrar and cloud-computing company GoDaddy reported strong year-over-year revenue and earnings-per-share growth. Indeed, the company's top line of $680 million, which was up 17% year over year, handily beat a consensus analyst estimate for revenue of $674 million. This performance was driven by the 1.14 million new customers GoDaddy added since the year-ago quarter and an 8.6% year-over-year increase in average revenue per user.

But where GoDaddy disappointed was its earnings per share. On average, analysts were expecting earnings per share of $0.17, well above the $0.08 GoDaddy reported. Shares of GoDaddy fell about 8% on the day after its earnings release.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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

GoDaddy Inc. Stock Quote
GoDaddy Inc.
GDDY
$70.00 (1.20%) $0.83
Square, Inc. Stock Quote
Square, Inc.
SQ
$179.72 (-0.88%) $-1.59
Roku Stock Quote
Roku
ROKU
$210.16 (2.24%) $4.61

*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
624%
 
S&P 500 Returns
140%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/07/2021.

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

Our Most Popular Articles

Premium Investing Services

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