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Roku Stock Skyrockets Despite Q3 Net Loss

9 Nov, 2017 By: Erik Gruenwedel

Wall Streets ignores $46.2 million loss, upping streaming media device pioneer’s stock on improved revenue, among other metrics

Roku’s first-ever fiscal quarter result impressed Wall Street, with shares up nearly 45% in early trading Nov. 9 at $27.14 per share.

The euphoria followed Nov. 8 fiscals in which the streaming media device pioneer saw revenue increase 40% to $124 million, compared with revenue of $89 million during the previous-year period.

Roku attributed much of the gain to platform revenue derived from advertising, revenue-sharing agreements (DirecTV Now, Hulu Live, HBO Now, Sling TV, Showtime, etc.), user subscriptions (16.7 million) and sales of branded Roku TVs.

“We hit a new milestone this quarter with over 50% of new accounts coming from license sources,” CEO Anthony Wood said on the fiscal call.

In addition, advertising represented approximately two thirds of platform revenue, with the majority derived from ad-supported channels, including The Roku Channel.

Platform revenue skyrocketed 137% to $57.5 million from $24.2 million, while device revenue increased 4% to $67.2 million from $64.7 million a year ago.

Indeed, while player units grew 35% year-over-year, revenue growth was offset by a 23% decline in average selling price and shift to lower-priced players like the $29.99 Roku Express.

“Our deliberate strategy to drive account growth through low-cost players and Roku TV licensing continues to prove effective, demonstrated by 48% active account growth,” Wood and CFO Steve Louden wrote in the shareholder letter.

Roku said branded TVs from Chinese manufacturing partner TCL ranked No. 2 for U.S. smart TV sales in September, and No. 4 in year-to-date sales, up from No. 19 in 2014. One in five smart TVs sold in the U.S. and Canada in the quarter were licensed Roku TVs.

Meanwhile, Roku posted a $46.2 million loss, up 262% from a loss of $12.7 million a year earlier. The company attributed the loss in part to a $37.7 million charge derived from the value of the underlying preferred stock, which rose in value as a result of its IPO earlier this year.

Regardless, Roku is projecting losses from $8 million to $14 million in the current fourth quarter.

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