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Roku (ROKU)
NASDAQ:ROKU
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Roku
(NASDAQ:ROKU)73Outperform
Positive Factors
Advertising Growth
Roku's strengthened position as an advertising platform is shown by advertising revenue growth surpassing peers.
Financial Performance
Roku reported revenue, adjusted EBITDA, and net additions ahead of consensus estimates.
Negative Factors
Valuation Concerns
Despite the strong finish driven by growth initiatives and political advertising, the valuation is considered full with tough comparisons expected in the next year.
Roku (ROKU) vs. S&P 500 (SPY)
Market Cap
$11.74B
Dividend YieldN/A
Average Volume (3M)3.96M
Price to Earnings (P/E)―
Beta (1Y)2.78
Revenue Growth18.03%
EPS Growth82.15%
CountryUS
Employees3,150
SectorCommunication Services
Sector Strength85
IndustryTraditional Media
Share Statistics
EPS (TTM)-0.90
Shares Outstanding128,740,390
10 Day Avg. Volume3,359,409
30 Day Avg. Volume3,960,037
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)2.85
Price to Cash Flow (P/CF)36.90
P/FCF Ratio36.90
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$106.36Price Target Upside32.27% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering22
Roku Business Overview & Revenue Model
Company DescriptionRoku, Inc. is a leading company in the digital media player industry, specializing in providing streaming solutions that connect users to vast content libraries over the internet. The company's core products include Roku streaming players, Roku TV, and the Roku Channel, which together offer a platform for users to access various streaming services, such as Netflix, Hulu, and Disney+. Operating primarily in the consumer electronics and technology sectors, Roku is recognized for its user-friendly devices and robust content ecosystem, enabling seamless streaming experiences for consumers globally.
How the Company Makes MoneyRoku generates revenue through a combination of hardware sales, platform services, and advertising. The company sells streaming players and licenses its Roku OS to TV manufacturers, earning revenue from each unit sold. A significant portion of Roku's revenue comes from its platform segment, which includes advertising sales, subscription and transaction revenue shares, and licensing fees. Roku partners with content providers to feature their channels on its platform, earning a share of subscription fees and pay-per-view transactions. Advertising is another critical revenue stream, as Roku sells ad space on its platform and through The Roku Channel, leveraging its large user base to attract advertisers seeking targeted and effective digital advertising solutions. Additionally, strategic partnerships with TV brands and content providers further enhance Roku's platform, contributing to its overall earnings.
Roku Financial Statement Overview
Summary
Roku exhibits strong revenue growth and solid cash flow management, with a notable 18.04% revenue increase and 22.94% free cash flow growth in 2024. However, profitability challenges persist with negative net and EBIT margins. The balance sheet is stable, with a low debt-to-equity ratio and high equity ratio, indicating financial resilience.Income Statement
Roku has demonstrated strong revenue growth with a 18.04% increase in 2024. However, profitability remains a critical challenge as indicated by negative net profit margin (-3.15%) and EBIT margin (-5.31%). Despite these challenges, the company maintains a solid gross profit margin of 43.89%, showcasing operational efficiency.65
Positive
Balance Sheet
Roku's balance sheet is sound with a manageable debt-to-equity ratio of 0.21 and a healthy equity ratio of 57.92%, indicating financial stability. However, the consistent negative net income affects the return on equity, which stands at -5.19%.70
Positive
Cash Flow
The company shows robust cash flow management with a positive operating cash flow to net income ratio of 1.69 and a significant improvement in free cash flow, growing by 22.94% in 2024. This indicates strong liquidity and cash generation capabilities despite net losses.75
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 4.11B | 3.48B | 3.13B | 2.76B | 1.78B | Gross Profit |
| 1.81B | 1.52B | 1.44B | 1.41B | 808.22M | EBIT |
| -218.17M | -792.38M | -530.89M | 235.10M | -15.02M | EBITDA |
| 219.86M | -570.67M | -382.96M | 313.21M | 49.93M | Net Income Common Stockholders |
| -129.39M | -709.56M | -498.00M | 242.38M | -17.51M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 2.16B | 2.03B | 1.96B | 2.15B | 1.09B | Total Assets |
| 4.30B | 4.26B | 4.41B | 4.08B | 2.27B | Total Debt |
| 512.71M | 654.27M | 664.64M | 484.59M | 402.68M | Net Debt |
| -1.65B | -1.37B | -1.30B | -1.66B | -690.14M | Total Liabilities |
| 1.81B | 1.94B | 1.77B | 1.32B | 942.53M | Stockholders Equity |
| 2.49B | 2.33B | 2.65B | 2.77B | 1.33B |
| Cash Flow | Free Cash Flow | |||
| 212.98M | 173.24M | -149.90M | 188.04M | 65.81M | Operating Cash Flow |
| 218.04M | 255.86M | 11.79M | 228.08M | 148.19M | Investing Cash Flow |
| -25.06M | -92.62M | -201.70M | -176.82M | -81.32M | Financing Cash Flow |
| -89.20M | -61.24M | 8.36M | 1.00B | 509.05M |
Roku Technical Analysis
Neutral
80.41
Price Trends
81.87
Negative
78.66
Positive
70.57
Positive
Market Momentum
0.21
Positive
43.87
Neutral
13.91
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ROKU, the sentiment is Neutral. The current price of 80.41 is below the 20-day moving average (MA) of 86.20, below the 50-day MA of 81.87, and above the 200-day MA of 70.57, indicating a neutral trend. The MACD of 0.21 indicates Positive momentum. The RSI at 43.87 is Neutral, neither overbought nor oversold. The STOCH value of 13.91 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for ROKU.
Roku Risk Analysis
Roku disclosed 68 risk factors in its most recent earnings report. Roku reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Roku Peers Comparison
Overall Rating
UnderperformOutperform
Sector (59)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
82 Outperform | $2.16T | 36.91 | 20.72% | ― | 10.99% | 91.61% | |
77 Outperform | $134.23B | 8.57 | 18.92% | 3.45% | 1.78% | 11.62% | |
75 Outperform | $416.03B | 49.05 | 35.21% | ― | 15.28% | 65.72% | |
74 Outperform | $2.09T | 21.17 | 30.80% | 0.35% | 13.89% | 38.99% | |
73 Outperform | $11.74B | ― | -5.19% | ― | 18.03% | 82.15% | |
72 Outperform | $197.07B | 35.40 | 5.51% | 0.84% | 3.97% | 89.53% | |
59 Neutral | $30.54B | 0.25 | -13.23% | 4.04% | 2.36% | -49.53% |
* Communication Services Sector Average
Performance Comparison
ROKU
Roku
80.41
17.62
28.06%
AMZN
Amazon
203.80
29.68
17.05%
CMCSA
Comcast
35.50
-5.26
-12.90%
GOOGL
Alphabet Class A
170.92
38.73
29.30%
DIS
Walt Disney
109.01
-2.85
-2.55%
NFLX
Netflix
972.58
374.08
62.50%
Roku Earnings Call Summary
Earnings Call Date: Feb 13, 2025 | % Change Since: -7.36% | Next Earnings Date: Apr 24, 2025
Earnings Call Sentiment Positive
The earnings call for Roku's Q4 2024 was largely positive, highlighting strong growth in platform revenue, successful advertising strategies including political ad revenue, and significant international expansion. While there are some concerns about device margins and potential impacts from Walmart's acquisition of VIZIO, the overall outlook remains optimistic with expectations of continued growth in 2025.Highlights
Strong Q4 Performance and Platform Revenue Growth
Roku reported a strong fourth quarter with a 25% growth in platform revenue. Excluding political advertising, the growth was 19%.
Advertising Success
Advertising performed exceptionally well, with strategies to create unique ad units and reach targeting contributing to the success. Political advertising was notably strong, contributing 6% to the quarter's revenue.
International Expansion
Roku is the number one streaming platform in Canada and Mexico and is experiencing growth in Latin America and the UK. The company expects to reach 100 million streaming households globally in the next 12 to 18 months.
Free Cash Flow Improvement
Roku reported over $100 million in free cash flow for 2024 and expects this to grow faster than adjusted EBITDA in 2025.
Lowlights
Device Margin Pressure
There was a decline in device gross profit due to excess inventory and market pricing pressures, which will impact Q1 2025.
Impact of Walmart's Acquisition of VIZIO
Concerns were raised about Walmart's acquisition of VIZIO potentially affecting Roku's retail partnerships and product emphasis.
Company Guidance
During the Roku Fourth Quarter 2024 Earnings Call, management highlighted strong performance and provided guidance for 2025. Roku achieved a 25% growth in platform revenue in Q4, with expectations of 16% year-over-year growth in Q1 2025 and 12% for the full year. Excluding political contributions, growth is anticipated at 15% for 2025, outpacing 2024. Platform gross margins are projected at 52.5% for 2025, slightly down from 53.5% in 2024 due to 606 adjustments, which are not expected to recur. Adjusted EBITDA is guided at $350 million, implying a 130 basis point improvement in margins. Free cash flow is anticipated to exceed adjusted EBITDA in 2025, with an end-of-2024 mark of over $100 million. Key growth drivers include increased ad demand, third-party DSP partnerships, and subscription revenue, with a focus on leveraging Roku's home screen for monetization. Despite device margin pressure from holiday discounting, Roku expects flat device gross profit for 2025 on higher revenue, with improving margins throughout the year.Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.