Roku Inc (NASDAQ: ROKU) Stock Tumbles On Disappointing Earnings

Roku Inc (NASDAQ: ROKU) has been one of the more notable growth stocks in the market for quite some time, but the stock declined on Friday in pre-market trading following the announcement of the Q1 2020 results. Roku’s loss per share was in line with estimates, but the company did manage to beat revenue expectations.

Major Disappointment

The results also gave an indication of the sort of effect the coronavirus pandemic had on the company’s business. Roku had made advertising an important part of its growth strategy, but ad spending has gone down in recent months, and that had a major effect on the revenues.

The stock slid by as much as 10% in pre-market trading as investors expressed their sentiments about Roku’s performance. Roku generated revenues of $321 million for the quarter, which was comfortably higher than the analysts’ estimates of $307 million. On the other hand, the loss per share of 45 cents matched analysts’ estimates.

Roku announced that it added 2.9 million active accounts in the first quarter, and that reflects a rise of 37% year on year. On the other hand, the streaming hours on its platform rose by 1.6 billion hours to hit 13.2 billion hours. It was a year on year rise of 49%.

Another important aspect of the company’s performance is its platform revenue, and that came in at $232.56 million. It also includes the $88.21 million Roku generated from device sales and from the player segment. However, the most important announcement from Roku was the fact that it suffered more advertising cancellations that it had expected. That being said, the company managed to ride out that problem since advertising revenues from its platform rose significantly.

In the letter to shareholders, Roku stated that there are near term challenges to its advertising business. However, due to an explosion of over the top usage, the company has managed to gain in other metrics like consumer engagement and content distribution.

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