Blogs -Roku And Pinterest: Ad-Tech Earnings Review

Roku And Pinterest: Ad-Tech Earnings Review


August 25, 2020

author

Beth Kindig

Lead Tech Analyst

This article was originally published on Forbes on Aug 20, 2020,11:32pm EDT

On August 5th, Roku announced very strong Q2 results led by outstanding account growth. Total revenue grew 42% YoY to $356 million, representing a beat of 7% above consensus estimates. This was by far the strongest Q2 sales growth across ad-tech as Roku’s competitors each posted significant revenue growth decelerations.

This was a challenging quarter for the industry, as digital advertising spend is expected to decline 5% YoY. Roku outpaced its competitors by growing monetized video ad impressions 50% and expanding first time ad clients 40%. From H1 2019 to H1 2020, Roku’s retention rate among advertisers that spent $1 million or more in H1 2019 was a resilient 92%. 

Chart showing Roku total revenue grew 42% YoY

Deutsche Bank is estimating that US ad spend for connected TVs will double over the next few years from the current $8B spent annually. Roku is ideally positioned to be the main beneficiary of this trend as growth in the number of active accounts and streaming hours reinforce Roku’s role as an essential distribution partner for advertisers who want to scale rapidly. Further, Roku is depending on the hardware portion of its business less than ever, as consumer hardware has shrunk from 55% of Roku’s revenue at its IPO to less than 30% in Q2. 

Despite posting the highest growth in the industry, Roku trades at the most attractive valuation in comparison to its peers. The Trade Desk, Snap Inc., and Pinterest have each seen their multiples expand 15%+ over the last year & trade at a premium to Roku. Their growth rates have declined significantly over the same time frame. 

Chart showing Snap, Pinterest, and The Trade Desk Quarterly YoY Growth

The Trade Desk, in particular, now trades at a 70% higher premium than it did a year ago while its growth rate has dropped from 38% to -12.9%. In comparison, Roku’s multiple has contracted from 12.8x to 11.4x despite posting consistent 40-55% growth. Roku is in an ideal position to continue to deliver sustained 30%+ growth as it has proven to be the most resilient ad-tech stock and will capitalize on growing ad spend for connected TVs. 

Chart: EV/NTM Revenue Multiples

Pinterest reported better than expected Q2 results, beating consensus estimates by 9% on revenue and 7% on global monthly active users (MAUs). Most impressive was its international revenue growth, as the $42m number they announced came in 46% above estimates. Pinterest also reported 49% international MAU growth, blowing past estimates by 9%. 

Sign up for I/O Fund's free newsletter with gains of up to 403% - Click here

Pinterest saw broad based user growth in the US and international regions, so the key remains increasing its average revenue per user (ARPU), which dropped 21% globally to $0.70. In the US, the company’s ARPU was $2.50 (-11% YoY) while international ARPU was just $0.14. In comparison, Facebook’s global ARPU stands at $8.52. This represents a great opportunity for Pinterest to accelerate its growth, particularly by increasing monetization per-user internationally. Monetization for international regions should improve over time as the company expands its sales presence in under-capitalized markets. 

Graph: International MAUs and ARPU of Pinterest

Credit Suisse estimates Pinterest will report $0.23 International ARPU in Q4, representing a 64% improvement in international monetization from Q2. This would be the best quarter of international ARPU the company has ever reported, which coincides with estimates calling for a record quarter of international revenue. 

Graph: Pinterest International Revenue

Pinterest saw US revenue fall 3% YoY in Q2, but management guided for 35% growth in Q3 and noted that revenue in July accelerated 50% YoY. With the expected rebound from a weak Q2 in the US, Pinterest can reaccelerate its growth to 40%+ by capitalizing on its international monetization opportunity. Management addressed its plan for this opportunity in the conference call, clarifying that that they are investing in those markets by hiring aggressively and building out their sales team. If the company can execute on these initiatives to drive higher international ARPU, as analysts are forecasting, shares of Pinterest will benefit from the upcoming growth.     

Clearly, ad-tech companies make solid investments especially for their tendency to have strong bottom line growth. This particular subsector usually has a clear path to profitability while other tech verticals must spend heavily on R&D. However, guiding for 30%+ revenue growth following single to double-digit negative growth carries risk as covid-19 has proven to drive unpredictable ad spend this year. Pinterest and The Trade Desk have set a high bar for themselves based off July results with this forward guidance.  

As I covered previously, Apple’s changes to IDFA will likely put pressure on The Trade Desk as a third-party ad exchange without a first-party relationship. Pinterest also alluded to the decreased ability to measure conversions, yet thanks to their first-party relationship, this may be surmountable through their own measurement tools. These effects will begin to show up in Q4 after the release of iOS 14 in September.

Gains of up to 403% from our Free Newsletter.

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

+344% on Nvidia

+403% on Bitcoin

+218% on Roku

*as of March 15, 2022

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 324% on Zoom, 601% on Nvidia, 445% on Bitcoin, and 4-digits on an alt-coin. 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

Nvidia's Fiscal Q3 Earnings Preview: The Pressure Is On

Nvidia’s Fiscal Q3 Earnings Preview: The Pressure Is On

Nvidia has surged this year with 241% gains YTD, which has more than doubled the returns of the FAANGs. This is no small feat considering it’s widely understood Big Tech is holding up the broader mark

November 27, 2023
Apple Building

Apple’s Services Growth Flywheel Continues To Strengthen

Apple’s Services segment was one of the brightest spots in a relatively in-line earnings report at the beginning of November, topping an $85 billion run rate as growth jumped back to the high double-d

November 21, 2023
Tesla Sells 33% Of Vehicles Below Average Cost, BYD Pulls Ahead

Tesla Sells 33% Of Vehicles Below Average Cost, BYD Pulls Ahead

BYD more than doubled Tesla’s China sales in October as Tesla’s sales slipped on a month-over-month basis, while NEV startups showed strong sales numbers across the board. China’s new energy vehicle (

November 14, 2023
Solar Panels

Solar Stocks Still Searching For A Bottom

Solar is arguably one of the market’s most sold-off industries at the moment, with the Invesco Solar ETF falling more than 42% YTD as the industry struggles to find growth in a high-rate environment.

November 07, 2023
Five Stocks (Not Seven) Can Lead to New Highs

Five Stocks (Not Seven) Can Lead to New Highs

The majority of other sectors are confirming a continuation of the 2022 bear market, meanwhile, a handful of big tech names, with outsized weighting in the major indexes, suggest that they want to go

October 27, 2023
Big Tech Stocks: Q3 Earnings Preview

Big Tech Stocks: Q3 Earnings Preview

Earnings season has officially kicked off, with Big Tech headlining a busy week next week: Microsoft and Google report on Tuesday, followed by Meta on Wednesday, and Amazon on Thursday. Big Tech stock

October 22, 2023
Apple Building

AI Could Be Apple’s Next Chapter

After Nvidia added $750 billion in value this year on the backs of surging AI chip demand, investors are quickly searching for the next trillion-dollar AI winner. AI is the best investment opportunity

October 18, 2023
AI is the Best Investment Opportunity of our Lifetime: Video Interview

AI is the Best Investment Opportunity of our Lifetime: Video Interview

Real Vision invited Beth Kindig back for a candid interview with Raoul Pal for a one-hour discussion on how to position for AI. As discussed in the interview, the reason that AI will be the best inves

October 06, 2023
The Next Market AI Will Disrupt Is Cybersecurity

The Next Market AI Will Disrupt Is Cybersecurity

Cybersecurity is one of the highest costs that enterprises face at 12% of IT budgets on average, and this cost is rapidly rising. While a company can lay off staff or reduce marketing and R&D expenses

October 04, 2023
Nvidia Was Up 235% In 2023, Don't Expect It To Continue

Nvidia Was Up 235% In 2023, Don’t Expect It To Continue

We’ve had unwavering conviction in Nvidia’s AI story since November of 2018. In fact, it was our leading position going into 2023 and our AI allocation of 45% exceeded Stanley Druckenmiller at 29%, me

September 26, 2023
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 of 30 positions, a private forum, webinars, and real-time trade notifications. Sign up for Premium.

We are on social networks


Copyright © 2010 - 2023
Get Free Weekly Analysis on the Best Tech Stocks