Roku: Complete Disaster

seekingalpha2022-07-30

SummaryRoku posted a horrible set of results on nearly every metric, though user accounts are up.The Roku revenue growth story has now changed, and so this stock remains overvalued and risky.Roku ...

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Comments

PJoo
2022-07-31
PJoo
Advertising has been selective
Thalos
2022-07-31
Thalos
Complete trash talk also.
SPOT_ON
2022-07-31
SPOT_ON
Finished
Vincent1968
2022-07-31
Vincent1968
Bad bad bad
Thalos
2022-07-31
Thalos
The article will be redundant once ever Roku rebound into positive. Sounds sell a lousy stock for now?Dump it at all cost? Even Roku is to drop another 50%. What is down will be up again
Bharatt
2022-07-31
Bharatt
Is it bad? Or good for buyers?😃😃😃

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Roku, Inc. (NASDAQ:ROKU) stock has been a complete disaster for longs. Just pull a one month, 3-month, or 12-month chart. The losses are absolutely staggering, and today the shares are seeing theicing on the cake as the stock has crashed more than 20% after the company's horrific Q2 report.We received a request to comment on the stock and we felt we would put pen to paper. In short, we would still avoid Roku stock, though long-term investors could soon be getting an attractive price. However, we think it is speculative, and the subscriber numbers and trends are very telling. Your money is best put elsewhere in our opinion.Top line results in contextThe company missed revenue estimates by a rather large $40.2 million. The company also reported a much larger-than-expected loss for the quarter of $0.82, missing on estimates by $0.13.When you have a company like this that is losing money, you cannot miss estimates. Revenue growth is key. While revenue did grow 18.5% from last year, the bottom line is that this is such a slow pace of growth, it is hard to defend the bullish thesis. While valuation improves as the stock falls, if growth cannot keep pace, the stock will remain in free fall.It really is a disaster, but it is also a simple fact with innovative stocks like this.All about the new accounts and ad dollarsThe key to watch here in our humble opinion has been subscriber growth or loss. That is the key, followed by expenses to attract accounts. Now this is the number one selling TV operating system in the U.S. and is the number one TV streaming platform in the U.S., Canada, and Mexico by hours streamed. That is a fact. Active accounts were positive in Q2, as they added 1.8 million incremental active accounts to reach 63.1 million. That was a plus.But the current economic state is causing advertisers to pause and reconsider spend, which is painful in the short term for Roku, which relies on this. Another indicator to watch is the stream hours. Stream hours were 20.7 billion. This was up 3.4 billion hours year-over-year, but down 0.2 billion hours from Q1. Not terrible.So why the big revenue miss?According to management, it was:Recessionary fears and elevated inflation caused advertisers to significantly curtail or pause spend in the scanner market and consumers to moderate discretionary spend. This adversely affected our Q2 platform revenue growthAdvertising still grew. In fact, ad revenues were still up 26% year-over-year to $673 million. The problem is that this was way below expectations. Even after the massive fall in Roku shares, growth needs to be stellar because the valuation is so high.But it gets worse. While there are new accounts, and some growth, the company sees reduced demand for its players because consumer discretionary spend is going to be down. This comes from a shaky macro environment. It is not good. Q2 player revenue was down 19% while player unit sales were down 16% year-over-year on a selling basis. Disaster.MarginsA company like this, that is sky-high valued, with account growth and player sales being key, you expect to see strong margins. Folks, margins were crushed in the quarter. Awful. Total gross margin was 46% in the quarter. Q2 platform gross margin was 56%, which was down nine points year-over-year. Q2 player margin was negative 24%, which was down roughly 18 points year-over-year. This is horrible.ProfitabilityFor a long time, it seemed Roku would be sustainably profitable, at least that is the path it was on. We saw that the company lost $0.82 per share. Further, Q2 adjusted EBITDA was negative $12 million. The one positive is that they ended the quarter with nearly $2.1 billion of cash and short term investments. All is not lost, but it is not looking good.Poor guidance digs the hole furtherWe look at the results, and, it is clearly poor. The macro environment stinks. Sure, the company is still growing revenue. That is good. But the pace of growth has stalled, margins are crimped, advertisers are skittish.In the future, when things are better, Roku could ramp. Long-term investors could get speculative here, but there are better places to trade and invest. With this horrible result, it gets worse as Q3 guidance is so bad there will be barely any year-over-year revenue growth, with even lower sequential gross profit margins, and an even larger loss. All that talk of revenue growth still being there, well, that is out the window, for now. Management stated:As a result, our third quarter outlook is for the following; total that revenue of $700 million up 3% year-over-year, gross profit of $325 million with a gross margin of 46% and the adjusted EBITDA of negative $75 million. These estimates reflect our viewpoint that the second half operating environment will be increasingly challenging. We expect roughly stable platform margin on a sequential basis.This is an awful reduction and outlook. This is because they are facing an increasingly difficult and uncertain environment and are getting hit on both sides, by the consumer and the advertisers. This pressure is not going away until likely next year in our opinion, when the economy bottoms out and we start to rebound.Take homeWise traders have probably gotten out of Roku a long time ago. The stock is super speculative but looks to head lower. Until the trends reverse course, the stock will suffer. The company is getting hit from both pressured consumers and advertisers. The results were bad, and the guidance worse, as now the revenue growth story has been eroded. Avoid the stock.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":9901708627,"gmtCreate":1659259301369,"gmtModify":1676536278479,"author":{"id":"3572863479502236","authorId":"3572863479502236","name":"PJoo","avatar":"https://static.tigerbbs.com/c1df329f4341646fc633446858d34c31","vip":1,"crmLevel":4,"crmLevelSwitch":0,"idStr":"3572863479502236","authorIdStr":"3572863479502236"},"htmlText":"Advertising has been selective","listText":"Advertising has been selective","text":"Advertising has been selective","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9901708627","repostId":2255591773,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9901253318,"gmtCreate":1659227663134,"gmtModify":1676536272996,"author":{"id":"4101955883486630","authorId":"4101955883486630","name":"Thalos","avatar":"https://community-static.tradeup.com/news/55ba87139db7cd8dd783879dbd6ed4c5","vip":1,"crmLevel":9,"crmLevelSwitch":1,"idStr":"4101955883486630","authorIdStr":"4101955883486630"},"htmlText":"Complete trash talk also.&nbsp;","listText":"Complete trash talk also.&nbsp;","text":"Complete trash talk also.","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9901253318","repostId":2255591773,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9901267119,"gmtCreate":1659226632031,"gmtModify":1676536272713,"author":{"id":"3582922989777578","authorId":"3582922989777578","name":"SPOT_ON","avatar":"https://static.tigerbbs.com/080f029371339d9db26930961de6adb1","vip":1,"hat":"https://static.tigerbbs.com/a3dee1aa3a3a3c1814833a4d3f8a5669","crmLevel":4,"crmLevelSwitch":1,"idStr":"3582922989777578","authorIdStr":"3582922989777578"},"htmlText":"Finished&nbsp;","listText":"Finished&nbsp;","text":"Finished","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":3,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9901267119","repostId":2255591773,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9901264062,"gmtCreate":1659226549556,"gmtModify":1676536272674,"author":{"id":"3586393315819735","authorId":"3586393315819735","name":"Vincent1968","avatar":"https://community-static.tradeup.com/news/7f106edb1e06baf3c68462c050422f46","vip":1,"crmLevel":2,"crmLevelSwitch":0,"idStr":"3586393315819735","authorIdStr":"3586393315819735"},"htmlText":"Bad bad bad","listText":"Bad bad bad","text":"Bad bad bad","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9901264062","repostId":2255591773,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9901269507,"gmtCreate":1659225876809,"gmtModify":1676536272527,"author":{"id":"4101955883486630","authorId":"4101955883486630","name":"Thalos","avatar":"https://community-static.tradeup.com/news/55ba87139db7cd8dd783879dbd6ed4c5","vip":1,"crmLevel":9,"crmLevelSwitch":1,"idStr":"4101955883486630","authorIdStr":"4101955883486630"},"htmlText":"The article will be redundant once ever Roku rebound into positive. Sounds sell a lousy stock for now?Dump it at all cost? Even Roku is to drop another 50%. What is down will be up again","listText":"The article will be redundant once ever Roku rebound into positive. Sounds sell a lousy stock for now?Dump it at all cost? Even Roku is to drop another 50%. What is down will be up again","text":"The article will be redundant once ever Roku rebound into positive. Sounds sell a lousy stock for now?Dump it at all cost? Even Roku is to drop another 50%. What is down will be up again","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9901269507","repostId":2255591773,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9901237524,"gmtCreate":1659222360668,"gmtModify":1676536271990,"author":{"id":"4110517357648632","authorId":"4110517357648632","name":"Bharatt","avatar":"https://community-static.tradeup.com/news/01b61334ecaa34be386b848cc6733aa1","vip":1,"crmLevel":7,"crmLevelSwitch":0,"idStr":"4110517357648632","authorIdStr":"4110517357648632"},"htmlText":"Is it bad? Or good for buyers?😃😃😃","listText":"Is it bad? Or good for buyers?😃😃😃","text":"Is it bad? Or good for buyers?😃😃😃","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9901237524","repostId":2255591773,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"isCommentEnd":false,"newsSizeData":{"likeSize":192,"commentSize":25,"repostSize":0,"favoriteSize":1,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.1","shortVersion":"4.29.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2255591773"}