Despite ballooning operating losses, Roku saw a significant upswing in its after-hours trading last week as subscriber gains and better-than-anticipated revenue boosts. Brandon Blake, our entertainment attorney on the ground from Blake & Wang P.A, shares the details.
Operating Losses Mount
Q4 operating losses widened to almost $250M, despite net revenue peaking at $867M (and active subscriber accounts hitting 70M). To put that in context, it’s a 1,270% decline on the previous year, so seeing the stock price respond positively was a shock to say the least.
However, it seems Wall Street is focusing on that better-than-expected revenue performance over the short-term losses and decline in the ad revenue market. Their platform business continues to be a strong driver here, with the device business showing some evidence of shrinking. Although we have their new Smart TV range launch to possibly offset that in the coming year.
Rising Streaming Hours
Roku also saw a 23% year-on-year increase for hours streamed, peaking at just short of 24B hours. For Q1 of the new year they’re expecting to see losses continue, but at least pull in to the $205M level. Ad revenue is pegged at about $700M, with gross profit to land at $310M. During Q4 they also expanded their FAST channel lineup with some key licensing deals, including a sports deal with the National Hockey League. No doubt the unexpectedly good performance of Weird helped bolster them a little, too.
So while it was a mixed bag for Roku overall, their prospects seem to be continuing strong. As not only a participant, but also a battleground for other streamers, Roku is well positioned to weather the economic downturn for now. We shall have to wait and see what 2023 brings as they target ‘high end’ segments of the market in the new year.
