Roku Inc. (NASDAQ:ROKU) reported stronger-than-expected sales for both the first and second quarters, with total revenue increasing by 19% and 14% year-over-year, respectively. The company also posted a Q2 loss of 24 cents per share, better than the anticipated 42-cent loss.
Despite this positive earnings performance, Roku’s stock has fallen over 40% year-to-date, in contrast to Netflix Inc.’s (NASDAQ:NFLX) 27% gain.
Founded in 2002, Roku initially gained traction as a streaming device maker, launching its first set-top box in 2008. Today, the company relies heavily on ad revenue rather than its media players, a segment that faces increased uncertainty due to recession concerns.
Roku’s revenue is divided into two segments: Platform and Devices. In Q2, Devices revenue was $143 million, making up less than 15% of total revenue, and reported a loss of $15.2 million. However, Device sales increased by 39% year-over-year, driven by the broader distribution of Roku-branded televisions.
The Platform segment, which represents 85% of Roku’s total revenue, generated $824 million in the June quarter, marking an 11% year-over-year increase due to growth in streaming service distribution and advertising.
CFO Dan Jedda acknowledged a challenging growth comparison for streaming services and expects continued difficulties in media and entertainment. However, the company anticipates a boost in advertising revenue in Q3.
Following the earnings report, several analysts have revised their Roku stock price targets.
Cathie Wood, known for her investments in disruptive technologies, has been actively buying Roku stock. In June alone, she acquired 454,700 shares over five transactions. Since the beginning of 2024, Wood has added over 1.8 million shares of Roku to her portfolio.
Roku is the second-largest holding in Wood’s flagship Ark Innovation ETF, comprising 9.2% of the fund’s assets as of June 30. Despite this, ARKK’s net asset value decreased by 16.1% in the first half of 2024.
In 2022, Ark had projected Roku’s active accounts would reach 157 million by 2026, with a share price target of $605. Currently, Roku shares trade at around $52, with 83.6 million streaming households as of June 30.
Analysts have adjusted their price targets for Roku following the Q2 earnings report. Pivotal Research analyst Jeffrey Wlodarczak reduced Roku’s price target to $65 from $75 but maintained a Hold rating. Wlodarczak cited consistent performance with expectations despite ongoing challenges in media and entertainment and a temporary oversupply of streaming ad inventory.
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Author Faith Yakubu 
