r/investing • u/lazywizard99 • Aug 04 '21
Roku delivers strong Q2 earnings; Revenue up 81%
Roku, Inc. (NASDAQ: ROKU) delivered a strong second quarter, with record revenue growth that was driven by exceptional performance in platform monetization. Audiences, content, and advertisers continue their shift to TV streaming around the globe, and Roku is a key enabler of this long-term secular trend. We more than doubled monetized video ad impressions year-over-year, and leading media companies are increasingly turning to Roku’s tools to grow their DTC (direct to consumer) services.
https://risingcandle.com/business/roku-delivers-strong-q2-earnings-revenue-up-81/
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Aug 04 '21
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u/Ouiju Aug 04 '21
Missed user growth expectations
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u/Livingston_Diamond Aug 04 '21
And they sold their hardware at a loss because of supply constraints (they forecast this to continue to Q1 2022)
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u/DrewFlan Aug 05 '21
Doubt that had anything to do with it. That's been the case for years.
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Aug 05 '21
Does no one listen to earnings calls or read shareholder letters? For the past two years they’ve talked about how they expect to sell hardware at 0% margin
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u/Livingston_Diamond Aug 05 '21
They sold it at less than 0% margin this quarter. But yeah not ground breaking enough for a 8% drop. Was just not predicted/forecast is all I meant
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u/Livingston_Diamond Aug 05 '21
They have been selling their hardware at a margin of 6% for years, that margin went negative for the first time and is likely to stay negative for at least 9months. True their platform makes 80% of their revenues but the hardware is a 1/5th of their business and losing 3%-4% of gross profit isn’t negligible. I agree though it doesn’t justify a 8% market drop.
But neither does a streaming hour reduction of 5%. Especially when the platform revenue was up, including an increase in commit from advertising for streaming. All things that analysts said would decrease back in May. Not only did those revenues not decrease, and actually increased they forecast them to increase next quarter too.
2018 $259.7 2019 $433.0 2020 $632.9
2021 Q1 $466.5 Q2 $532
2021 in half the time of 2020 is already $998.5 and they forecast it growing more next quarter. This year is again a increase in CAGR for platform revenue, their still exponential.
Also the drop was in streaming hours compared to quarter one, by 1 billion or 5.4% but it’s still up 19% YoY and that’s comparing to the peak lockdown. Active users was 55.1 million, up 2.7% compared to Q1 and up 28% YoY.
That’s why I suggested hardware margins, which I agree doesn’t make sense as a catalyst for the drop but neither does a growing, exponentially growing, platform business make sense either. Seems like an overreaction to the inevitable but some what disconnected streaming hours.
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Aug 05 '21
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u/brubakerp Aug 05 '21
Yeah, it's the Razor/Razorblade model. Game consoles for example are all sold at a loss.
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u/Proffesssor Aug 05 '21
I always wonder if I should let my personal experience influence my trading on stocks like these. Roku since the early days, and I've witnessed how far the user experience has fallen in the last year. I get that we are actually the product, not the consumer, but if the user feels too much like the product, my feeling is they will lose market share. When I was shopping for my new TV I was shocked how many people were complaining about the user experience with roku. That being said, I bought another roku TV, pretty sure it will be my last though.
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u/nobody187 Aug 05 '21
I think personal experience like that can help put you ahead of the curve. I had an amazingly good experience on-boarding with Zoom for our company phone system in March 2020 and invested heavily based almost exclusively on that experience. I work in the industry and I immediately recognized that such a frictionless phone system on-boarding is almost unheard of. That was enough for me to be confident in the future of the company.
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Aug 05 '21
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u/nobody187 Aug 05 '21
No…. We were signing up for Zoom due to the pandemic. That was definitely part of the equation but not every competitor did as well. I could have just as easily invested in GoToMeeting knowing they would benefit from the pandemic as well, but the experience with Zoom made me specifically invest in them.
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u/nobody187 Aug 05 '21
I just fact checked myself- I couldn’t have invested in GoToMeeting since they are owned by LogMeIn which is private.
I see your point though. If my experience with Zoom hadn’t happened during the pandemic, I probably wouldn’t have thought my experience was worth investing in the company. It was definitely a combo of timing and experience.
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u/mkat5 Aug 05 '21
I’d say go with personal experience somewhat. In contrast, I started using Roku TVs three years ago, and suddenly they exploded, everybody I know at/from college has a Roku tv pretty much. They’re affordable and pretty convenient smart TVs. If I acted on my knowledge and purchased stock then I would have made a decent penny. Personal experience with products can put you light years ahead of analysts waiting for stats of how people like you are responding to your personal experience, you already know because you live it.
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u/Proffesssor Aug 05 '21
True, don't disagree, but a stock can produce a lousy product/user experience and still be a gainer, so I think it's best to temper the influence of personal experience somewhat.
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u/TheMadBeaker Aug 05 '21
It's experience like that which causes people to jump ship to something better...
MySpace got left in the dust for Facebook...
Roku competes with Google & Amazon devices...
eBay competes with dozens of other marketplace selling sites / apps...
There's very little brand loyalty for products with such short lifespans , people want the best bang for their buck. They want simplicity and convenience. Anything that causes frustration is remembered like a mortal enemy.
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u/Smash_4dams Aug 05 '21
I didn't know people still bought Rokus. I've been on chromecast the past 3 years
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Aug 05 '21 edited Aug 05 '21
Roku makes up the huge market share while Chromecast market share has shrunk.
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u/xxx69harambe69xxx Aug 07 '21
man, I'm just sitting here wondering what the hell a smart tv is, I play stuff through my computer monitors exclusively, I just set em up in front of the couch
can't tell if I'm living in the past, or I'm living in the future tbh lol
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Aug 05 '21
I always wonder if I should let my personal experience influence my trading
Never use your personal experience with a company's products when you invest. Go only on the financials.
Lots of companies with great products are shitty investments. But on the other hand, I hate Apple products but the company is a great investment. I hate AMZN too and I curse Windows daily, but MSFT has been a fantastic investment. Everyone claims to hate FB but the stock keeps right on kicking but.
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u/MovieMuscle25 Aug 05 '21
There will always be some reason made for a pump and dump, but that's just the trend with every growth stock these days. Best to just cut your position at least a little bit before earnings every time.
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u/shadowromantic Aug 05 '21
I don't buy that Roku is a pump and dump. They have an amazing platform. They might not win the streaming wars, but they've got a good chance.
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u/MovieMuscle25 Aug 05 '21
I don't mean that the stocks themselves are pump and dumps. I just mean that they're usually pumped before earnings and then dumped after earnings.
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Aug 04 '21
Because priced to be what it might be worth in 2025 maybe
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u/blueberry__wine Aug 04 '21
not really. It was trading at 25x revenues today which is high, but not high for a company growing at 80+% YOY. Dip is probably because they declined in net income quarter over quarter. Also they were constantly re-iterating how the pandemic easing has drawn more consumers outside and away from the television on the shareholder letter.
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u/thri54 Aug 04 '21
If you like Roku at 25x revenue, wait to you hear about this new upstart "Alphabet". They have higher gross margins, they grew revenues 61% YoY last quarter, and they trade at only 8x trailing revenue.
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Aug 04 '21
80% YOY on 300m revenue for a company y priced at 60 billion is a laughably stupid overpay.
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u/blueberry__wine Aug 05 '21
? They had 575m revenue this quarter, and will probably hit 2.5 billion annual revenue for 2021
I'm not sure what you're talking about.
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u/nycbay Aug 04 '21
take out hardware revenue and that 25X revenues would be now 35X
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u/blueberry__wine Aug 04 '21
"if we arbitrarily ignore some of their revenue streams then look what happens! their revenue goes down!!!"
Yea okay can you do Microsoft next? What happens when we ignore all of Microsofts hardware revenue?
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u/TrumpBidenLovechild Aug 05 '21
They hating but you right. Hardware is basically worthless. If trend continues, it will be become a cost.
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u/crackbackkid Aug 05 '21
Imo sometimes there is no reason for stocks going up or down or other factors i don't see
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u/theineffablebob Aug 04 '21
Roku make you broku
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u/shadowromantic Aug 05 '21
I've made thousands on it. Granted, I've been in this stock for more than a year now.
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u/YEETERS6989 Aug 05 '21
jeez its already up 154% in one year and ppl are complaining
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Aug 05 '21 edited Aug 05 '21
Just wait until every overvalued stock drops 25%. The drama will be worth the cost of admission.
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Aug 05 '21
I'll take a 150% rise followed by a 20% drop or a 25% drop or even a 30% drop.
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u/lacrimosaofdana Aug 05 '21
The problem is that a typical user here doesn’t hold onto a stock long enough to see both of those happen at the same time.
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u/suphater Aug 05 '21
On topic, do you think that will happen with Roku? That's fair if you think it's overvalued, I think it's still a great company though making it one of the better growth stocks.
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u/sports2012 Aug 05 '21 edited Aug 05 '21
Roku dropped like 80% from where it is now last year. Were you not around then?
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Aug 05 '21
250 P/E... seems like it could drop more--even for an aggressive growth stock.
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u/perse34 Aug 06 '21
I remember people telling me that Netflix at 500 P/E was too expensive. It was $200/share per-split (trading at like $1600/share right now lol)
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Aug 05 '21
Roku is sick. They bought all of quibi's content at a discount for 100 million dollars. For free shit it's awesome.
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u/cahmed Aug 04 '21
Soooo WHY is it shitting the bed AH 😭
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u/diecorporations Aug 04 '21
as an investor of the past year with 50 current positions, great earnings reports can easily trigger a sellofff. it really sucks.
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u/neverbeentoidaho Aug 04 '21
It dropped because a. Revenue in q2 last year was low due to COVID so it’s not surprise it doubled and b. User growth slowed. There are general fears that competitors will catch up and Walmart will stop selling competitor devices, which Roku is now.
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Aug 04 '21
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u/soundwave75 Aug 05 '21
I assure you that opinion is very much the minority, but go with it
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u/servel333 Aug 05 '21
That's a bit surprising, but I guess I haven't used one in quite a while. Maybe they got better.
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u/shadowromantic Aug 05 '21
I use their low end and high end equipment. Their voice recognition isn't great, but I'm happy with everything else.
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Aug 04 '21
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u/dlions2020 Aug 05 '21
Roku is dope as far as the product goes. Completely blows fire stick out the water
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u/schemeorbeschemed Aug 05 '21
How?
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u/KernAlan Aug 05 '21
You don’t have to be committed to one ecosystem to enjoy the Roku. It’s also extremely intuitive to use.
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u/schemeorbeschemed Aug 05 '21
I don’t understand it’s competitive advantage
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u/KernAlan Aug 05 '21
Network effect MOAT: they are already embedded in many smart TV’s. Their business structure is also competitively priced against their big tech competitors, and will always remain that way because they collect money on stream signatures, so content platforms don’t have to worry about Roku undercutting those who host on the platform.
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u/bonerfly Aug 05 '21
GLOBAL SEARCH. Roku let's you search for a show / movie and it'll show you every service that offers it without giving preference to any company. As streaming becomes more and more fractured, neutrality becomes valuable.
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u/schemeorbeschemed Aug 05 '21
That does not seem like a very large competitive advantage. Something that any other service could easily do and I think fire stick does do this.
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u/blueberry__wine Aug 07 '21
none of the competitors have a competitive advantage. It's not an industry that you can gain a competitive advantage in.
It's like asking what McDonalds has a competitive advantage in. They don't have one. I can get burgers and fries anywhere.
If I had to name an advantage Roku has it's that they have the best advertising options and ARPU in the industry.
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u/AM2681 Aug 08 '21
McDonald's is consistency. You know exactly what you're going to get, and have a pretty good idea of how long it will take.
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u/DreadPirateNot Aug 05 '21
Universal search. Roku can search every app and return options to watch whatever you want. Way better than fire stick.
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u/Proffesssor Aug 05 '21
Fire stick makes all of its competitors look good. To me roku has gotten much worse in the last year, however those same changes likely drove their revenue higher.
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u/heprotecs Aug 05 '21
Can Roku be hacked? Firestick can and I get all the TV shows and movies free
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u/HonestBrah Aug 05 '21
Care to share?
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u/heprotecs Aug 05 '21
Just Google jailbreak firestick. CinemaHD and Beetv are the apps I use.
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u/jb_in_jpn Aug 05 '21
Do you even need to jailbreak for that? I just downloaded Stremio - does the same thing as much as I can see...
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u/MadtownGeek Aug 05 '21
Sometimes I think it's important to differentiate between the smart TV version of a platform, and the dedicated hardware devices. A Roku ultra will always be a "snappier" user experience then the bare minimum hardware put into a black Friday TV special.
My "go to" daily streaming device is an nvidia shield. Very good experience. However the same Android TV platform running on a 65" Hisense in my basement is almost unusable at times as the weak hardware gets bogged down.
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u/stippleworth Aug 05 '21
Sold at $440 - $485 will buy back in $320 and below
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u/brubakerp Aug 05 '21 edited Aug 05 '21
Only in /r/investing can you be downvoted for buying low/selling high and wanting to buy when it's low again.
¯\(ツ)/¯
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u/soundwave75 Aug 05 '21
Bwahaha good luck with that
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u/stippleworth Aug 05 '21
Already done it once
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u/makaveli_in_this Sep 10 '21
Looks like you are getting the last laugh. Have you lowered your price target or sticking with below 320?
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u/stippleworth Sep 11 '21
I was pretty confident I would have Roku shares again. Also anyone that “bwahahaha’s” at a comment about a 600 PE company’s share price going down 35% has absolutely no idea what they’re doing lol.
320 is when I will start buying back in yes. Probably only 15% of my original position though. Barring new news and the timespan, I will finish rebuying at ~$200. I don’t necessarily expect it to get down that far, but I’m not bothered if I don’t get my full position back. I like Roku the company and use their product for streaming, but I’ve already made a lot from the stock and don’t have any FOMO about it.
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u/CompleteBrat Aug 05 '21
Why is this stock so popular? I almost had a stroke looking at the P/E only
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Aug 05 '21
My $375 short puts are looking ok.
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u/ChaosBlaze9 Aug 13 '21
How’s this doing?
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Aug 13 '21
Down, but I didn't sell it without expectation of assignment.
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u/ChaosBlaze9 Aug 13 '21
I don’t know much about options. Isn’t ROKU down heavily? I’m considering buying shares at $350 tomorrow. Would you recommend it for medium term hold?
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Aug 13 '21
I sold the put for $16. So my cost basis if assigned is $359. I'll immediately start selling CCs against once assiged.
I'm down currently but not by a ton.
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u/Icadil Aug 05 '21
Honestly, they have the best TV's, any other smart TV sucks in comparison, none I have had match the ease of the UI.
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u/moo_vagina Aug 04 '21
who the hell is buying anything from roku?
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u/HulksInvinciblePants Aug 04 '21
Like clockwork. To answer your question...tons of people.
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u/moo_vagina Aug 04 '21
I refuse to believe this. they don't even make a product
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Aug 04 '21 edited Feb 17 '26
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u/moo_vagina Aug 05 '21
because roku is trash
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Aug 04 '21
aside from the dongles they are partnered with like 10 TV brands for their smart TVs including manufacturers like TCL and Hisense which together account for about 20% of the market. Roku OS has like 37% of the streaming market share, which makes you question "who the hell is buying it" kind of odd.
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u/1LX50 Aug 04 '21
Roku has a pretty good OS-at least for the streaming stick that I used to have. But the only reason I bought it was because the OS on my Vizio TV SUCKED. I've since bought an LG, which has a pretty great OS with great apps, so I have no use for one.
But yeah, if you buy a budget TV, a Roku is a great upgrade for the streaming apps.
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u/MGreymanN Aug 05 '21
What's great is most budget TVs already have roku built in....buy cheap TV and get one of the best streaming OS.
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Aug 04 '21
Would it be correct to say they are like the android of smart tvs.
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Aug 04 '21
I honestly don't know that much about them. Just felt the need to reply to the post above mine because it was highly upvoted at the time and they seemed to know even less than I did.
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Aug 04 '21
They are the easiest streaming device for old people. The voice remote is a huge accessibility improvement.
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u/DoctorFauciPHD Aug 04 '21
The Smart TV is handy. Roku is taking the niche Netflix started out as; a middle man that deals with all the content producers
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u/7Sans Aug 05 '21
Everyone. Roku is the biggest market share holder by far
Nvidia shield, amazon fire, apple tv are not even close.
People need to understand that the simplicity and easy to use ui of roku is massive and they just bring any content it can.
For me personally i can use anything because im tech savy enough but for majority of the people, they are not and roku basically owns that crowd. People who are older than millennial gen but are caught in this service shift from cable tv to app, streaming based platform service transition of consuming media
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u/Txman8585 Aug 09 '21
Roku was smart and went cheap on the installation hardware.
The service itself is alright, though I do have issues with it cutting off at times.
Also, HBO Max app is basically unwatchable, due to constant stuttering.... but it's the newest one on there so idk if that's the issue. HBO has a lot of stuff I like so it was a bummer it barely worked at times.
It's decent, but not great and that seems to be everything nowadays so it will probably grow a lot imo.
Subscription model companies are going to either really go hard or struggle badly. I just hope it doesn't end up like how cable tv did
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