What happened
Shares of home entertainment specialist Roku (ROKU 0.09%) surged as much as 23% higher on Friday thanks to a strong fourth-quarter report. The stock pulled back to a slightly milder 22% gain as of 2 p.m. EST.
So what
The provider of devices and services tied into various streaming audio and video solutions saw its fourth-quarter sales rise 46% to $276 million. On the bottom line, earnings fell from $0.06 to $0.05 per diluted share. The analyst consensus had been pointing to earnings near $0.03 per share on net revenues in the neighborhood of $262 million.
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Now what
Roku's streaming-device sales rose by 21% while platform revenues soared 77%. Since the software-based platform also carries much lower costs of revenue than the hardware-based segment does, Roku doesn't mind the lower-cost business outgrowing the streaming devices division. The additional gross profits were poured right back into the business as Roku boosted its research and development budgets by 63% while nearly doubling its sales and marketing expenses.
Check out the latest Roku earnings call transcript.
This company is behaving like a classic high-growth upstart, and the stock has been appropriately volatile. Roku investors have enjoyed a 68% gain so far in 2019, but share prices are actually back almost exactly where they were 52 weeks ago. Today's positive market reaction to a solid holiday quarter looks correct to me.
