Roku Stock Drops Despite Strong Fourth-Quarter Earnings

Photographed by Ryan Young
Roku CEO Anthony Wood

The company brought in revenue of $188 million during the final three months of 2017.

Roku stock is plummeting, even though the company reported stronger than expected fourthquarter earnings results. 

The maker of streaming television devices said Wednesday that it brought in $188 million in revenue during the final three months of the year and earned 6 cents per share. Wall Street was expecting Roku report revenue of $183 million and losses of 11 cents per share. 

Despite the strong quarter, Roku shares have dropped nearly 20 percent during after-hours trading on the Nasdaq. There had been some concern that the company, which went public in September, was trading at too high a valuation. Roku shares closed the day flat at $51.13, giving it a market cap of $5 billion. 

Roku splits its revenue into two categories. Revenue from sales of its players (which retail for a range of prices) dropped 7 percent to $103 million during the quarter, but revenue from advertising via its platform grew 129 percent to $85 million. 

CEO Anthony Wood has spoken at length about his plan to transform Roku from a device company to a software company. He sees the future of the business in selling advertising around the content that it provides to consumers. To that end, Roku focuses more on account holders than devices sold. During the fourth quarter, the number of active accounts grew 44 percent to 19.3 million. Streaming hours were up 55 percent to 4.3 billion.

In a letter to shareholders, Wood laid out his focus for the coming year, indicating that his priorities are Roku TV (in which Roku licenses its name and software platform to manufacturers like TCL), its newly established Home Entertainment Network, its platform business, its over-the-top advertising platform and the ad-supported Roku Channel launched last year. 

For the full year 2018, Roku expects revenue between $660 million and $690 million and losses between $55 million and $40 million. In the first quarter of 2018, Roku expects revenue between $120 million and $130 million and losses between $21 million and $15 million.