Roku’s revenue forecast for Q1 was just shy of Wall Street targets but the stock is getting destroyed

Roku's stock has been on a tear since its IPO.

Roku’s stock has been on a tear since its IPO.
Reuters / Brendan McDermid

  • Roku reported fourth-quarter 2017 earnings on Wednesday.
  • The company beat Q4 expectations, but gave a weaker than expected revenue forecast for Q1.
  • Shares of Roku plunged more than 20% in after hours trading.

Roku, the maker of connected TV boxes and software for smart TVs, reported healthy growth in subscribers and streaming hours during the last three months 2017 but gave a lackluster financial forecast for the current quarter that sent its stock tumbling in after hours trading on Wednesday.

Although Roku’s Q1 revenue forecast only narrowly missed Wall Street targets, the stock’s meteoric rise in recent months may have contributed to the steep sell off on Wednesday.

Shares of Roku, which have more than tripled since the company’s September IPO, were down as much as 21% in after-hours trading Thursday following the release of its results.

Roku also forecast a net loss of between $40 million and $55 million for the full 2018 year. That’s deeper than the $35.9 million that analysts expected the company to lose for the year, according to Wall Street Journal report.

Here are the results versus Wall Street’s expectations:

  • Q4 EPS (adjusted): $0.06 vs. ($0.10) expected
  • Q4 Net Revenue: $188.3 million, up 28% year-over-year, and above the $182.5 million expected
  • Active accounts: 19.3 million up 44% year-over-year
  • Q4 Average Revenue per User: $13.78 (trailing twelve month basis) vs. $9.28 in year ago quarter
  • Q1 Revenue forecast: $120 million to $130 million, compared to $132 million expected by analysts
  • Full year 2018 revenue forecast: $660 million to $690 million, versus $661.5 million expected by analysts

Roku has been on a huge run since it went public last year. Even though it faces competition from tech giants like Apple, Google, and Amazon, Roku’s stock is nearly triple its IPO price. Part of the stock’s success is tied to the company’s success with its ad platform.

The company sells low-cost hardware devices that allow consumers to easily stream internet video, such as Netflix, onto their TVs. But Roku has been shifting its business to becoming an online video streaming “platform” that can be built directly into TVs and can serve as the home screen for the growing number of “cord cutters.”

READ MORE: Roku’s CEO explains why he hasn’t been crushed by giants like Apple and Amazon – and why a newcomer will conquer the streaming TV market (BI PRIME)