Roku Beats Earnings Expectations but Wedbush Issues a Downgrade - TheStreet

Shares of Roku Inc. (ROKU) - Get Report  jumped 25.23% to close Friday at $64.47 after the media streaming service reported adding 7.8 million subscribers in 2018 on its way to topping analysts' fourth quarter top- and bottom-line estimates.

Roku reported revenue of $275.7 million and earnings of 5 cents a share. Analysts were expecting revenue of $262.1 million and earnings of 3 cents.

The company also gained in all of its key metrics. Roku's average revenue per user, probably the most important metric for the company, rose 30%, or $4.17, to $17.95 in the quarter.

The number of active accounts in the quarter increased 40% year over year to 27.1 million as streaming hours increased 69% to 7.3 billion hours. The company said that more than one in four smart TVs sold in the U.S. in 2018 were Roku TVs.

Those numbers weren't enough to impress analysts at Wedbush, however, who downgraded the stock to neutral from outperform.

"We lowered our long-term EPS estimate on a lower operating margin assumption, given a greater likelihood of higher spending levels than we previously modeled," analyst Michael Pachter said. 

Additionally, Pachter said he doesn't expect the company's international expansion to start bearing fruit until 2020. 

Roku said that it expects to reach revenue of $1 billion in 2019, ahead of Wall Street expectations of $985.2 million. The company said it hopes to break even this year as it increases its head count at roughly the same 36% growth pace of 2018.

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