Roku (ROKU) Posts Mixed Q1 Earnings, Will It End Up Like Netflix?

Trade ROKU Stock Your Capital Is At Risk
Ollie Martin
Updated: 29 Apr 2022

Key points:

  • Roku beat on revenue but illustrated a slowdown in user growth
  • The company follow rival Netflix, whose value plummeted recently on a loss of subscribers
  • The company issued Q2 guidance of $805M in revenue, and a EBITDA of break-even

Roku (NASDAQ: ROKU) was a high-growth streaming play that flourished over the pandemic as streaming trends soared, but as more people return to the outside, investors are growing concerned regarding a slowdown in account growth. In Roku’s Q1 earnings report, the company beat on revenue predictions, but also indicated a slowdown in user growth, guiding below expectations for current quarter sales. 

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ROKU shares are currently trading at a premarket gain of 5% after a few choppy reversals, a strange reaction to a streamer that has just announced a clear slowdown in user growth. We all saw what happened to Netflix recently, shedding huge amounts of value after its quarterly report illustrated the first loss in subscribers for over 10 years. Since the start of this year, NFLX shares are down over 66%; a sharp loss for the streaming company everyone thought had a firm grip on the market. 

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Total company revenue rose 28% to $734M, beating expectations of $719M. Gross loss also improved from a tricky Q4, but gross margin fell by over 7% and operating income swung to a heavy loss of $23.5M from a $75.8M gain last year. Akin to Netflix amongst other streamers, active accounts is one of the key metrics for investors. 

Roku recorded a growth in accounts of just 2% sequentially. If the company continues to record lower growth in users, it won’t take long for bears to dictate ROKU price action. The company issued Q2 guidance of $805M in revenue, gross profit of $395M, and EBITDA of break-even against a year ago gain of $122.4M.

Clearly the company is suffering as the pandemic streaming bubble pops, yet shares are up over 5% in premarket trading. It needs to maintain solid user growth in order to not end up like Netflix, and there’s no doubt that this will be a difficult task. 

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