What happened
Shares of Roku (ROKU 0.15%) were pulling back last month as investors responded to a mixed bag of news items, including a middling earnings report from the leading streaming distribution platform.
According to data from S&P Global Market Intelligence, the stock finished the month down 15%. As you can see from the chart below, Roku shares were volatile throughout the month, with a slide in the second half of the month that seemed to start after Netflix reported earnings.
So what
Roku kicked off the month with some good news as it said that the Disney+ ad-supported plan was now available on its devices, ending a monthslong dispute with the entertainment giant.
The following week, Baird analyst Vikram Kesavabhotla initiated coverage on Roku with a neutral rating and a price target of $71.
In the third week of April, the company launched a new primetime-reach guarantee, telling advertisers that they would reach a larger audience with Roku than they would airing during an average program on a top-five cable network.
That news came out at the same time as Netflix's earnings report, and shares of the leading streamer fell as it reported disappointing user growth. Roku stock also fell sharply over a two-day period following the Netflix report, giving up 9%. Netflix's update seems to show the streaming market is maturing, which would add to Roku's challenges.
When Roku reported its own earnings report the following week, investors seemed to shrug off the news as the stock barely moved, gaining just 1%.
The report shows the company continues to struggle with the slowdown in digital advertising as revenue rose just 1% to $741 million, but that still beat the consensus at $708.5 million. The company grew its user base with 1.6 million active accounts to reach 71.6 million, and streaming hours increased 20% to 25.1 billion.
On the bottom line, it reported an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss of $69.1 million, down from a profit of $57.6 million in the quarter a year ago as it ramped up spending last year ahead of a slowdown in revenue growth.
On a generally accepted accounting principles (GAAP) basis, its loss per share widened from $0.19 to $1.38, which matched estimates.
Now what
In its outlook, the company called for macro uncertainties to persist for 2023 and sees revenue of $770 million, representing a 1% increase, and an adjusted EBITDA loss of $75 million. The company stood by its goal of positive-adjusted EBITDA in 2024.
While Roku has an attractive position as the leading distribution platform, it's going to take time for digital ad growth to return and for the company to realign its spending with revenue. Investors will have to be patient with the recovery.
