Why Roku Shares Surged after Earnings
Roku beat earnings and revenue estimates
Digital streaming service provider Roku (ROKU) reported its fiscal 3Q17 numbers on Wednesday, November 8. The company easily beat earnings and revenue estimates, with revenues rising 40.2% YoY (year-over-year) to $124.8 million—higher than Wall Street’s estimate of $110.5 million.
However, Roku reported a net loss of $46.2 million, or adjusted EPS (earnings per price) of -$0.10, compared with -$0.17 per share in 3Q16. Analysts were expecting a loss of $1.40 per share. Notably, Roku saw a 48% YoY rise in active users.
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Roku is diversifying its business
The company initially made money from its Roku device, which connects televisions to streaming companies like Amazon.com (AMZN), Netflix (NFLX), and Hulu. Roku’s revenues have been rising along with these leaders in the cord-cutting trend. Devices made by Roku often facilitate these services.
However, the company is now beginning to make money from advertisements and from allowing TV companies to use its technology for a fee.
Roku went public in late September 2017, with an IPO (initial public offering) price of $14 per share. Its shares surged by 67% on the first day of trading. While the stock has fallen since then, it’s still trading above IPO its price, unlike other big tech startups like Snap (SNAP) and Blue Apron (APRN). Roku’s shares rose 26% in after-hours trading on Wednesday.