Blogs -Update on $ROKU – Will Roku Miss Earnings?

Update on $ROKU – Will Roku Miss Earnings?


May 08, 2019

author

Beth Kindig

Lead Tech Analyst

Will Roku miss earnings? I believe Roku will miss earnings at times, but for the big picture, Roku is at the center of an important trend in advertising and this will make for decent returns now and sizable returns in the future. I also don’t play the earnings game often with stocks as my analysis does not change monthly or quarterly. My conviction on Roku is high and can withstand trade war news or a fledgling quarter, which is normal for smaller companies on the edge of incipient trends.

What Investors Got Wrong With Roku

The first thing Wall Street got wrong with Roku is that investors thought Roku was a hardware player. Although it is clear now that the ad platform is what will drive the profits, this wasn’t evident in the financials for a few earnings reports. My three pieces of analysis in 2018 were the opposite; I made my readers aware the ad platform was where the growth potential was.

The second thing Wall Street gets wrong is assuming Google or Amazon can dominate over-the-top television because they are Big Tech and smaller companies don’t have a chance. Google struggles here and recently raised the prices on YouTube television to $49, which for the most part, negates the purpose of cord-cutting when you add a few subscriptions like Netflix or HBO Go, and end up at the monthly cost of cable. Amazon is pushing into ads for OTT, however, there will be privacy regulations to face as the data powering those ads is being brokered without consent from e-commerce and Prime purchases. You can ask Facebook how that is going for them.

Roku has all of the pieces to the stack. The hardware is a razor-razor blade model that locks in their ad-supported platform. They’re OTT-only, and this prevents privacy issues for the data they collect from the device (this is why Apple is always in the clear with privacy issues – data stay s on the device).

Also Read : Prediction: Here’s Why Roku Will Be The Next Tech Darling

Analyst Expectations Low for Q1 2019

Interestingly, the consensus EPS forecast for Roku is negative $0.24 compared to negative $0.07 same quarter last year with analyst expectations of declining growth. Meanwhile, Roku had posted EPS of $0.05 last quarter. Here’s a screenshot of Roku’s earnings per share vs. consensus:

https://images.prismic.io/bethtechnology/c8972c7d-e9c9-4790-940b-8f871f18c0a4_roku-quarterly-earnings.png?auto=compress,format

TradeDesk is also a Connected TV advertising player and reports on May 9th with analysts expecting declining growth from the previous quarter with estimates at $0.07 per share.

https://images.prismic.io/bethtechnology/09041097-d9da-42d6-a853-09492e846db3_Roku%E2%80%99s-earnings-per-share-vs.-consensus.png?auto=compress,format

With that said, advertising is driving record profits for many companies who have already reported this quarter, such as Facebook and Twitter. This is why I’m surprised (and don’t necessarily agree with) the low analyst expectations for both Roku and TradeDesk as these expectations of -$0.24 for Roku and $0.07 for TradeDesk are some of the lowest in these stocks’ earnings histories (1+ year or more).

Also Read : Roku Q3 Earnings: Choppy But Unshakeable Long-Term

My Opinion “Long on Roku Even if They Miss Q1 Earnings”

That was my headline last May in 2018 even though Roku did not miss Q1 2018 earnings. My stance on this stock remains the same. Roku is a core holding of mine because of the mega trend towards Connected TV advertising. To put it simply, and as I wrote before Q1 2018 earnings were reported, Roku beating or missing earnings is not my focus for a long strategy based on an important trend. I fully expect tech companies to miss earnings from time to time (this creates better buying opportunities). This won’t change my conviction that Connected TV advertising is on an important upward trajectory.

Here’s some more information on the Connected TV market:

“Two of the big trends in digital media aren’t compatible: The drive to enforce viewability standards and the shift to mobile, particularly apps.” – Digiday

Viewability issues are a serious issue for big brands who are averse to mobile in-app advertising because it’s too challenging to track. In addition, many big brands do not need immediate purchases which is called “purchase intent” – which is mobile’s main value over television.

For instance, Coca-cola doesn’t expect you to buy a soda immediately after seeing an ad. Audi doesn’t expect you to buy a car immediately either. So, a lot of the benefits of mobile aren’t worth the downside to these big brands. Advertising budgets shifted to mobile because they had to find audiences, not because it’s a superior method to advertise.

 Here’s how the two compare:

  • Pay TV has high completion rates as viewers are comfortable in their homes and better prepared to receive advertisements.
    undefinedundefined
  • Mobile offers audience data to better target viewers based on individual preferences.
    undefinedundefinedundefined

Connected TV advertising, which is Roku’s specialty, combines the best of both television and mobile. It offers 100% viewability and completion rates with the audience data and dynamic ad insertion found on mobile. Forbes covered this in a recent article which stated Ad Supported OTT is the future reporting OTT ads have a 97% completion rate and 100% viewability.

In a recent study by FreeWheel, 200 billion video starts found OTT ads had ballooned from 2% to 32% in a four-year period due to heavier investments from advertisers.

In the Q2 2018 Video Advertising benchmark study released by Extreme Reach, a tech platform for video ad campaigns, connected TV impressions overtook mobile, accounting for 38 percent of all video ad impressions down from 33 percent in Q1.

Also Read : Roku’s Stock Price: Will There Be Another Pullback?

Here’s a quote from Extreme Reach:

“CTV is clearly on the path to becoming the dominant platform for media consumption, and premium inventory is the most sure-fire audience draw.”

– Mary Vestewig, Senior Director, Video Account Management at Extreme Reach.

AppNexus, the world’s leading independent advertising technology company, announced in July of 2018 that advertiser spend in its connected TV marketplace grew 748% year-over-year versus the second quarter of 2017 and 68% quarter-over-quarter. AppNexus currently sees 20 billion monthly connected TV impressions per month.

From an investment standpoint, the implications of attracting more advertising dollars than mobile is enormous. Big brand budgets have been looking for a solution to traditional television that isn’t confined to the attention span and limited screen size of mobile viewers. With Roku, that option is finally here.

Please note: I’ve also covered TradeDesk, another stock doing well by capturing the Connected TV advertising trend. You can read that analysis here on FATrader and why the risks with TradeDesk have personally kept me from buying the stock although many of my readers have seen 400% returns on $TTD.

This analysis is not an earnings call. The purpose of this article is to revisit a few trends and predictions I made around this time last year in regards to Roku.

Gains of up to 485% from our Free Newsletter.


Here are sample stock gains from the I/O Fund’s newsletter --- produced weekly and all for free!

+370% on Nvidia

+485% on Bitcoin

*as of May 02, 2024

Our newsletter provides an edge in the world’s most valuable industry – technology. Due to the enormous gains from this particular industry, we think it’s essential that every stock investor have a credible source who specializes in tech. Subscribe for Free Weekly Analysis on the Best Tech Stocks.

If you are a more serious investor, we have a premium service that offers lower entries and real-time trade alerts. Sample returns on the premium site include 2583% on Nvidia, 806% on Chainlink, and 665% on Bitcoin. The I/O Fund is audited annually to prove it’s one of the best-performing Funds on the market, with returns that beat Wall Street funds.

beth

More To Explore

Newsletter

Amazon Building

Amazon Stock: Nearing $2 Trillion Club From AWS Growth & Ads Catalyst

Amazon is on the verge of joining the $2 Trillion Club, driven by a 4-percentage point accelerating in AWS to 17% YoY growth combined with strong 25% growth in advertising revenue.

May 21, 2024
Big Tech Logos

Big Tech Q1 Earnings: AI Capex Increases As AI-Related Gains Continue

Recent Q1 earnings releases from Microsoft, Amazon, Alphabet and Meta reaffirmed that AI spending is continuing to increase through 2024 as companies seek AI-related revenue gains.

May 14, 2024
The Risk is Higher in the Market than it Feels

The Risk is Higher in the Market than it Feels

In this report, we will show that the sentiment readings over the last several months suggest investors should be cautious. This is backed up by our broad market analysis, which indicates that risk is

May 02, 2024
We Are Raising Our Bitcoin Targets To $106K - $190K

We Are Raising Our Bitcoin Targets To $106K - $190K

Bitcoin is an asset where the bulls pound the table to “buy, buy, buy,” and the bears relentlessly and stubbornly call it a scam. In reality, both are the wrong approach. This is because although Bitc

April 26, 2024
Investing In AI with Beth Kindig: 1-Hour Video Interview

Investing In AI with Beth Kindig: 1-Hour Video Interview

Jordi Visser, CIO and Chairman of Weiss Multi-Strategy Advisers, spoke to Beth Kindig on the Real Vision podcast on March 20th, to dive deep into AI’s potential for explosive economic growth, how to f

April 19, 2024
https://images.prismic.io/bethtechnology/Zh50DEaI3ufuUONy_SemiconductorStocksQ4OverviewAIGainsHeatUp.jpg?auto=format,compress

Semiconductor Stocks Q4 Overview: AI Gains Heat Up

Semiconductor stocks are standout performers so far in 2024, with investor appetite for AI stocks remaining elevated as AI chip leader Nvidia continues its streak of high growth.

April 15, 2024
I/O Fund Catapults to 131% Cumulative Performance Due to Leading AI Allocation

I/O Fund Catapults to 131% Cumulative Performance Due to Leading AI Allocation: Official Press Release

I/O Fund, a tech research site that actively manages a real-time portfolio, announces returns of 57% in 2023 with a cumulative return of 131% since inception. This compares to popular tech ETFs that h

April 03, 2024
The Importance of Verified Returns and Risk Management for Retail Investors

Verified Returns & Risk Management: A Retail Investor's Imperative

Last year was a stellar year for investors – in 2023, the Nasdaq 100 rose 54% for its best annual return since 1999, while the S&P 500 gained 24%. The Magnificent 7 were the de facto leaders of this m

March 27, 2024
ARM Building

Arm Stock: AI Chip Favorite Is Overpriced

Arm Holdings is positioned to capitalize on the growing adoption of artificial intelligence (AI) technologies, leveraging its established licensing model and extensive ecosystem to drive future growth

March 26, 2024
Meta Building Picture

Top 3 Ad-Tech Stocks For 2024

Ad spending growth is widely forecast to accelerate in 2024, after a challenging macro environment significantly dented budgets and growth in 2023. The US advertising market is already showing positiv

March 18, 2024
newsletter

Sign up for Analysis on
the Best Tech Stocks

https://bethtechnology.cdn.prismic.io/bethtechnology/e0a8f1ff-95b9-432c-a819-369b491ce051_Logo_Final_Transparent_IOFUND.svg
The I/O Fund specializes in tech growth stocks and offers in-depth research for Premium Members. Investors get access to a transparent portfolio, a forum, webinars, and real-time trade notifications. Sign up for Premium.

We are on social networks


Copyright © 2010 - 2024
Get Free Weekly Analysis on the Best Tech Stocks