Roku’s Stock Hammered Despite Better Than Expected Q3 Revenue Growth

On paper, Roku did everything right when it posted its Q3 financials on Wednesday afternoon. The company added nearly 2 million active accounts — and reached 10 billion hours of content being streamed on its devices — while topping Wall Street’s sales projections. Roku also reported a smaller loss than anticipated, yet its stock was hammered 14% in after-hours trading after the company shared modest fourth quarter guidance. Roku increased revenue more than 50% year-over-year, with sales of $261 million narrowly surpassing analyst estimates of $257 million. The company, best known for making several streaming players, saw a slight dip in device sales from the previous quarter, but did increase sales 11% overall compared to the same time last year. Most of Roku’s Q3 sales stemmed from its growing advertising business, however, which accounted for nearly $180 million in revenue. Roku also posted a loss of 22 cents per share, compared to the 24 cents analysts expected it to lose per share. Overall, Roku lost $26.5 million during Q3, or about $19 million more than it did during the same period last year. On the bright side, active accounts hit 32.3 million, marking an increase of 1.7 million new customers from the previous quarter. Roku, in its letter to shareholders, boasted its viewers watched 10.3 billion hours of content during Q3 — or the equivalent of about 3.5 hours per account spent streaming each day. Typically, similar results in the past have sent Roku’s stock shooting up 10% or more. But on Wednesday afternoon, Roku’s stock was hit hard, diving 14% to $121 per share. The culprit appeared to be fourth quarter guidance from Roku that was in-line with analyst estimates; the company projected sales of $380 million to $396 million during the holiday season. “We continue to execute well against our long-term strategic plan as the TV market shifts to streaming,” the company said in its letter to shareholders. Heading into Wednesday afternoon, Roku’s stock had increased 40% in the three months since it reported its Q2 earnings, when the company first crossed the 30 million accounts threshold. Roku unveiled its new slate of media players in September, including an updated version of its most expensive device, the $100 Roku Ultra. The Los Gatos, California-based company enters the fourth quarter as two major streaming services, Disney+ and Apple TV+, are hitting the market. Their popularity, coupled with the strength of other established companies like Netflix and Hulu, could spur Roku users to spend even more time on their devices in the quarters ahead. Roku will hold a call at 2:00 p.m. PST to discuss its Q3 results.