Roku’s (ROKU) guidance implications for its platform growth and operating costs for the rest of the year were “muted” even as the streaming device maker delivered a fourth-quarter revenue beat, Macquarie said Friday.
The company late Thursday reported that its fourth-quarter net loss narrowed year over year to $0.55 per share from $1.70, while net revenue rose to $984.4 million from $867.1 million. Analysts polled by Capital IQ expected a GAAP loss of $0.53 on revenue of $968.1 million.
Platform revenue grew to $828.9 million from $731.3 million. That metric is expected to benefit from Roku’s recent strategy to open up demand to third-party demand-side platforms and retail media networks, Macquarie said in a Friday note. That would allow the company to capture incremental connected TV advertisement dollars and diversify its advertiser base, analysts, including Tim Nollen, wrote.
However, “ongoing weak (media and entertainment) sector spending looks like to cap overall ad growth at (roughly) 10% thereafter,” the analysts said. Macquarie cut its target price on the Roku stock to $88 from $93 while retaining its outperform rating.
The company’s shares plunged 24% ahead of market close on Friday.
Roku reported average revenue per user of $39.92 in the fourth quarter on a trailing 12-month basis, down 4% from a year earlier. It expects first-quarter revenue of $850 million, ahead of Wall Street’s views as of late Thursday. Roku said at the time that it anticipates maintaining the annualized fourth-quarter platform growth rate in the ongoing three-month period.
The company’s management said in a shareholder letter on Thursday that it was “mindful” of near-term macro headwinds and an uneven recovery in the ad market. It expects to face “difficult” year-over-year growth rate comparisons in streaming services distribution and a challenging media and entertainment backdrop for the rest of the year, according to the letter.
Roku delivered positive adjusted earnings before interest, taxes, depreciation, and amortization for 2023 and said it expected to repeat that performance this year.
However, Macquarie said the performance “may be at a more modest level.” The brokerage cut its adjusted EBITDA outlook to $123.7 million from $182 million for 2024 and to $280.9 million from $287 million for next year, according to the note.