If Roku (ROKU 0.15%) is going to regain its winning ways in 2020, its best shot at success will come on Thursday afternoon, when the streaming video pioneer posts its fourth-quarter results shortly after the day's close. The stock has declined 7% so far this year, a far cry from 2019 when it was the market's best-performing large-cap stock with a 337% ascent.
There's a lot to like when it comes to Roku, but it's also perfectly reasonable for the stock to catch a breath after last year's torrid run. No stock more than quadruples in a year without some degree of profit taking. Roku will have a great opportunity to remind investors why it's become the market darling for the booming streaming niche, and there's obviously a lot at stake when it comes to its upcoming report.
Roku like a hurricane
Roku's guidance for the quarter -- issued back in early November -- calls for revenue to clock in between $380 million and $396 million, rising 38% to 44%. Revenue should decelerate from the 50% pace it posted in the third quarter, and it won't even be all organic this time around. The holiday-containing quarter will include what Roku estimates to be roughly $13 million for the DataXu acquisition that closed during the period. Back that out and the organic top-line gain could be as low as 33%.
Things aren't as bad as they might seem. Roku has historically been conservative with its guidance. It was only targeting a 44% to 47% increase in revenue for the third quarter, and it clocked in just above 50% growth. Roku's fourth quarter has also been historically weighed down by its slower-growing hardware segment during the holiday shopping season.
There's a lot to like here. Roku's faster-growing and higher-margin platform revenue is the real driver these days, accounting for the lion's share of the business. All of the platform metrics should continue to inch higher. Roku's third quarter generated 32.3 million active accounts, 10.3 billion hours of streaming, and average trailing-12-month revenue per user of $22.58, up 36%, 68%, and 30%, respectively, over the past year.
It's hard to fathom the fourth quarter as a dud. With new streaming services launching and existing offerings hungry to reach the growing audience of cord-cutters, Roku is positioned perfectly to cash in on the revolution. Roku was one of the top stocks of 2019, and in a few days we'll know if it has a good chance to be a top stock of 2020.