Shares of Roku (ROKU +2.51%) have lost more than half their value in recent months. Investors can blame decelerating growth in revenue and active accounts. Investors can also blame slowing subscriber growth with Roku's content partners, including Walt Disney (DIS 0.81%).
This is why Disney's recent acceleration in subscribers at Disney+ is great news for Roku. It may not matter much for Roku's upcoming fourth-quarter earnings report on Feb. 17, but the new content coming to Disney+ could lead to better growth in active accounts as the year progresses.
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New content drives growth for Roku
Disney+ added just 2.1 million subscribers in the September quarter. With Netflix (NFLX 0.10%) growth also slowing during this period, it's not surprising that Roku's active account growth also decelerated in the third quarter from 28% to 23%.
Roku does have its own content distribution platform with The Roku Channel, where streaming hours have been growing faster than the rest of the platform. But Roku needs large content partners like Disney to be successful to attract more users.
Disney+ offered some big new releases during the holiday period, including The Beatles: Get Back documentary and the new Star Wars series The Book of Boba Fett. This helped attract 11.7 million new subscribers during the quarter.
Since Disney+ and other streaming services launched over the last two years, Roku's active account total has increased from 36.9 million in the fourth quarter of 2019 to 56.4 million in the third quarter last year.
To see that growth from a different angle, Roku added 17.6 million new accounts over eight quarters between the end of 2017 and 2019, but Roku added 19.5 million over seven quarters between Q4 2019 and Q3 2021.
Part of that growth can be credited to a pull forward of demand as more people turned to at-home entertainment during the pandemic. But there still has to be compelling content available for people to sign up, and that's why investors should look at Disney's quarter as a good sign that Roku can turn the corner in 2022.
What's in store for streaming
As new content becomes available from the big streaming services, that should drive more signups and engagement for Roku. On that note, Disney CEO Bob Chapek said that the back half of its fiscal year ending in September will feature "a truly stunning array of content," including two Star Wars series and two Marvel series.
We also can't forget the highly anticipated The Lord of the Rings: The Rings of Power series launching Sept. 2 on Amazon Prime Video, which is also available through Roku.
While Roku shares are down 55% over the last six months, it's interesting that the stock has started to flatten out somewhat since Disney reported strong subscriber growth. It's possible Roku may be getting close to a bottom, but of course, stocks can do wild things when companies report a fresh round of earnings results.
Roku will report fourth-quarter earnings on Thursday, Feb. 17 after the market close. I wouldn't expect a turnaround to happen in Roku's fourth quarter, but as more shows launch from leading content providers this year, Roku should benefit from a trickle-down effect. That could be a catalyst Mr. Market is overlooking right now.
