Roku (ROKU -2.18%) investors hoping to see the streaming TV pioneer make a big splash may have gotten the credibility cannonball that they were craving. Roku turned heads on Thursday afternoon, announcing the hiring of Fox Entertainment CEO Charlie Collier to step in as president of its ascending Roku Media segment.
Collier is a media industry vet with more than 25 years of transformational market leadership. He's been a rainmaker at previous posts, and he arrives at Roku at a time when it can use some fresh perspective. Headwinds are on the horizon. Roku needs to be ready.
Image source: Getty Images.
Changing channels
Set aside Roku's cascading stock price. The shares hit a new two-year low on Thursday, down a blistering 88% from the all-time high it hit just 14 months ago. Fundamentally speaking, Roku is holding up better than its share price. Active accounts are up 14% over the past year, clocking in at a record 63.1 million at the end of June.
Some metrics are holding up even better. Streaming hours per account are rising. Average revenue per user is climbing. It may be surprising to see the stock hitting its lowest level this week since March of 2020, but there have been some headwinds.
After rattling off six consecutive profitable quarters Roku kicked off this year with back-to-back deficits. Margins have contracted, and things aren't likely to get better anytime soon. Analysts don't see a return to profitability until 2026 at the earliest. The top line has naturally held up considerably better, but that's about to change.
Roku's guidance for the current quarter calls for another deficit, but more importantly the end of heady growth. The $700 million it's targeting on the top line in the third quarter is a mere 3% year-over-year advance and an 8% sequential decline.
Guidance implies that active accounts or ad revenue per user peaked last quarter. It's likely the latter, especially with the ad market feeling vulnerable in recent months with the economy teetering.
This is where Collier comes in. He won't be tasked with playing nice with the third-party apps that populate Roku's platform. Roku already has capable executives holding down the fort on that front. Collier will beef up content for Roku's owned-and-operated channels as well as the advertising sales team. It's the business that will be put to the test in the coming months, and Collier will have his hands full.
The upside is substantial if Roku can navigate the choppy waters that will make the next few months challenging. The stock has already discounted a pronounced setback, but naysayers have been burned for underestimating Roku in the past. It's still in a unique position with its service-agnostic platform, and the connected TV niche should hold up better than the broader advertising industry. Roku is an interesting streaming video stock, and bringing on an impressive hire shows how serious it feels about its potential.
Did Roku stock bottom out this week? It will be susceptible if the general market continues to sell off, but at least the boo birds will have to wait to see if the new executive hire -- as well as a pair of internal promotions -- can nudge Roku in the right direction.
