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Roku Posts Surprise Profit In 4Q; Surpasses 50M Active Accounts

Roku posted a profit for the fourth quarter, surprising investors. Additionally, the company surpassed 50 million active accounts, ending 4Q with 51.2 million active accounts.

The digital media player company reported diluted earnings per share (EPS) of $0.49, when analysts were expecting a loss of $0.05 per share. Roku’s (ROKU) revenues came in at $649.9 million, up by 58% year-on-year and beating consensus expectations of $617.7 million.

Roku stated in its letter to shareholders, “In 2020, the Roku OS was the No. 1 smart TV operating system in the U.S. with 38% unit share of smart TVs sold. Despite a pandemic-related advertising slowdown in the U.S., our  advertising business proved resilient with Q4 Roku monetized video advertising impressions more than doubling year-over-year, as advertisers increasingly followed users from traditional pay TV to streaming.”

Roku users streamed 17 billion hours of programming, up by 55% year-on-year. What’s more, Roku earned average revenue per user (ARPU) of $28.76 in 4Q. (See Roku stock analysis on TipRanks)

For the first quarter of FY21, the company expects to earn total net revenue of $485 million and a gross profit of $238 million. Roku also stated that historically, 1Q is a “seasonally softest quarter from a revenue perspective” as revenue is typically around 25% lower quarter-on-quarter.

Following the results announcement, Oppenheimer analyst Jason Helfstein raised the price target from $260 to $500 and reiterated a Buy rating on the stock. Helfstein said in a research note, “… 4Q results/1Q guidance highlight accelerating advertising revenue and enviable position within shift from linear to OTT”

“Top 6 agencies doubled investment in Roku during 2020, with strong FY21  upfront commitments. FY21 guidance suggests stable Platform GM outlook (~60%). International traction improving, with key OEM [original equipment manufacturer] partner TCL intending to release Roku TVs in Brazil and UK within 2021,” Helfstein added.

The rest of the Street is cautiously optimistic about the stock with a Moderate Buy consensus rating. That’s based on 10 analysts recommending a Buy, 5 analysts suggesting a Hold, and 1 analyst recommending a Sell. The average analyst price target of $413.60 implies about 8.7% downside potential to current levels.

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