Ahead Of Roku's Q4 Results, Analyst Identifies 3 Things Investors Should Watch: 'Struggle To See A Profitability Inflection'

Roku Inc. ROKU is scheduled to report its quarterly results on Wednesday, after the market close. Analysts, on average, expect a loss of $1.73 per share, reversing from a profit of $0.17 per share and a 7% revenue decline to $804.19 million.

An analyst at KeyBanc Capital Markets expects the stock volatility to continue, as investors weigh the potential for the second-half platform recovery against ongoing investment.

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The Roku Analyst: Justin Patterson has a Sector Weight rating on Roku shares.

The Roku Thesis: KeyBanc models fourth-quarter revenue and EBITDA of $828 million and a negative $120 million, respectively, reflecting higher platform revenue, analyst Patterson said.

“While the scatter market remains challenging, we believe Roku’s solid streaming hours in 4Q helped drive upside to revenue guidance,” he added.

Looking ahead, Patterson expects first-quarter revenue of $688 million, below the consensus estimate, and EBITDA of a negative $92 million, wider than the consensus EBITDA loss estimate of $65 million, reflecting investment in content and R&D.

Patterson listed the following as focus areas:

• Timing when Roku will open up more broadly to AdTech: Patterson expects Roku to announce a private marketplace in the first half of 2023. This would be a step forward toward improving platform revenue but one that would play out over quarters, he added.
• Impact of Roku TV on revenue and profitability: Patterson expects Roku TV to be a positive for hardware revenue, adding to gross profit dollars and dilutive to gross margin. He would seek answers to questions, including how much marketing would be put behind it and how TV partners are responding.
• Investment for 2023: Patterson expects the company to continue with investments, given a new TV launch is scheduled for the year. The 20% cash operating expenditure growth KeyBanc projects is responsible for the 2023 EBITDA loss that is wider than the consensus forecast, he added.

“While we see potential for 2023E revenue to be revised higher from the Roku TV launch (mid-year) and potential AdTech initiatives, we believe consensus understates cash opex growth for the year,” Patterson said, and added, “Thus, we struggle to see a profitability inflection, which we believe limits share price potential.”

Price Action: Roku closed Monday’s session up 0.84%, at $55.36, according to Benzinga Pro data.

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