What happened
Shares of Roku (ROKU 0.15%) declined 26.7% in November, according to data from S&P Global Market Intelligence, after the media-streaming platform leader's latest quarterly results left the market underwhelmed.
To be clear, Roku's quarter looked good at first glance. Revenue climbed 39% year over year to $173.4 million, which translated to a net loss of $11.7 million, or $0.09 per share. Both the top and bottom lines arrived above Roku's guidance, which called for revenue of $164 million to $172 million, and a wider net loss of $13 million to $18 million.
IMAGE SOURCE: ROKU
So what
By segment, Roku's enjoyed a 74% increase in platform revenue to $100.1 million, and a 9% increase in player revenue to $73.3 million. Underlying that growth was 43% increase in active accounts to 23.8 million, a 63% gain in streaming hours to 6.2 billion, and a 37% gain in average revenue per user, to $17.34.
So why did shares plunge? As it turns out, most analysts watching the stock were already modeling platform segment revenue of closer to $103 million, primarily given assumptions that Roku would be able to better capitalize on its fast-growing, highly engaged user base.
Now what
Management remained optimistic during the subsequent conference call, insisting that it doesn't see "a near-term ceiling on [Roku's] growth opportunity," while noting that Roku's current market share still represents only a small slice of the overall TV advertising industry.
In the meantime, Roku expects fourth-quarter revenue in the range of $255 million to $265 million -- or growth of roughly 38% from the same year-ago period -- which should translate to a bottom line in the range of a $4 million loss to net income of $3 million.
As such, and with shares trading at less than half their 52-week high set in early October, I think patient investors willing to watch Roku's long-term story play out could do well to consider opening or adding to a position now.
