Strong revenue growth
Roku’s (ROKU) stock returns have been more than impressive this year. The stock has risen ~235.0% year-to-date and ~300.0% since its IPO in September 2017, driven by solid revenue and earnings growth.
Last year, Roku’s revenue rose 44.8% year-over-year to $743 million. Analysts expect its sales to rise 41.3% this year, 34.0% in 2020, and 31.7% in 2021. In the first quarter, Roku’s sales growth accelerated sequentially from 46.0% to 51.0%. Although Roku’s revenue growth is expected to decelerate, its revenue could still grow robustly.
Whereas Roku has maintained a non-GAAP loss, its profit margin could improve. Analysts expect Roku’s EBITDA to increase from $23.5 million in 2019 to $153 million in 2021, and its net margin to expand from -5.5% in 2019 to -3.3% in 2020 and 2.1% to 2021. They expect Roku to become profitable in 2021.
Could Roku’s earnings and revenue growth boost its stock, or could it fall after its stellar run? Roku is valued at 11.5 times its expected 2019 sales.