Roku: Color on Quarter (141.05)
- RBC notes Roku posted a Beat & Lower Q3, with the Revenue Beat much smaller than in prior 2 qtrs. Fundamental trends were robust, tho mixed. Q4 Guide was in line to below Street re: Revenue, Gross Profit & EBITDA, due in part to aggressive investments. Raising ests (tho, mostly inorganically) and PT to $160. Reit Outperform.
- Needham notes Roku's 3Q19 reached key operating metrics including (most impressive to them) 32.3mm active accounts (ie, households), $22.58 ARPU, (up 30% y/y, well above linear TV's 15-22% reported CPM growth) and 10.3B hours streamed during 3Q. Each represented 30-68% y/y growth and all were above their estimates. 3Q19 revenue reached $261mm, up 50% y.y and in line with their estimate. Roku's Adj EBITDA loss of $0.4mm was much better than our projected loss of $7.6mm. Gross margins were light at 45.6% vs our 46.6% estimate, primarily driven by a shift to video ads which have a 50% margin vs other platform revenue where margins are 70%-80%, and 400 basis points lower hardware/player gross margins. Roku is guiding to 0% gross margins for its hardware in 4Q19. They also wonder whether sub rev shares have lower gross margins that AVOD rev shares.
- Oppenheimer maintains their Outperform rating and $155 target after ROKU reported mostly in-line results, after several quarters of material upside. FY guidance is largely unchanged adjusting for dataxu acquisition. Revenue 2% above Street, +50% y/y (Platform +79% vs. +86% in 2Q), though active accounts slightly missed their estimate, as net adds were flat y/y and guidance suggests more aggressive Player investment in 4Q, with Roku Express launched globally. The impact of the SVOD "streaming wars" is unclear short term, as most deals have longer-term incentives/accounting, with limited 4Q impact. The high percentage of 4Q ad revenue generated from Black Friday to December 25 is limiting management's visibility at this point. 2020's poised to be a pivotal year for ROKU (UK launch, "streaming wars," dataxu acquisition and agency adoption).
- Wedbush reiterates Neutral, $105 tgt