Roku (ROKU) - Get Roku, Inc. Class A Report stock fell sharply Thursday after the online streaming content provider reported stronger-than-expected second-quarter earnings and revenue but fell short on active accounts and streaming hours and also noted higher hardware costs.
Roku stock was down nearly 7% at last check after the company said earnings and revenue beat estimates but streaming hours declined to 17.4 billion from 18.4 billion in the previous quarter. Analysts had been expecting 19.4 billion hours streamed.
In a letter accompanying its earnings, Roku also noted that “tight component supply conditions and shipping constraints” related to its hardware that consumers plug into their television sets and monitors pushed costs higher and faster than expected.
“In Q2, we insulated consumers from increased costs for Roku players, which resulted in Player gross margin turning negative in the quarter,” Roku said.
Analysts were quick to re-rate their Roku outlooks, noting the numbers and forecasts add up to potential growth deceleration, even as streaming content ramps up following a pandemic-induced lull in production of new titles.
Wells Fargo analysts cut their price target on Roku to $488 from $519, telling clients that while average revenue per user growth “continues to impress” and the ARPU story will eventually win the day, Roku is likely to be a “hotly debated” name in medium-term. They kept their overweight rating on the stock.
Analysts at Citi, meantime, noted in their own research note that they expect shares to remain under pressure, with weaker net streaming additions “… likely to be the focus as this is key to the investment story.” The group held their buy rating on the stock.
Morgan Stanley also shared a muted post-earnings outlook for Roku, noting the results and guidance for the third quarter were “solid” but that “COVID comps shift markedly from a tailwind to a headwind.” They have an underweight rating on the shares.
For the third quarter, Roku said it expects revenue of between $675 million and $685 million, the midpoint of which would be a 51% increase from a year earlier.
At last check, shares of Roku were down 6.88% at $391.42. Year to date the stock has gained more than 32%.