Streaming video platform Roku added more new users than expected in the third quarter, which drove a top-line beat. Roku stock jumped Thursday on the news.
The San Jose, Calif.-based company added 2.3 million new accounts, ending the period with 75.8 million active accounts. Analysts had expected 1.8 million new accounts in the third quarter. Roku's sales rose 20% year over year to $912 million, topping the consensus estimate of $857 million.
However, the company's losses swelled in the September quarter to $2.33 a share, up from a loss of 88 cents a share in the year-earlier period. Analysts polled by FactSet had expected a loss of $2.08 a share for the third quarter.
"We remain committed to achieving positive adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) for full year 2024 with continued improvements after that," Chief Executive Anthony Wood and Chief Financial Officer Dan Jedda said in a shareholder letter. "We will balance this commitment with investments to further expand our scale, engagement, and monetization."
In the third quarter, Roku posted adjusted EBITDA of $43 million, vs. a forecast loss of $29 million.
Roku Stock Surges After Report
On the stock market today, Roku stock surged 30.7% to close at 78.05.
Roku's platform revenue, mostly advertising sales, rose 18% to $786.8 million in the September quarter. Meanwhile, its device sales rose 33% to $125.2 million, helped by new Roku-branded televisions.
For the fourth quarter, Roku forecast sales of $955 million, vs. the analyst target of $952 million.
Pivotal Research Group analyst Jeffrey Wlodarczak upgraded Roku stock to hold from sell after the Q3 report. He also raised his price target to 75 from 58.
"Roku occupies an attractive position in the content ecosystem," Wlodarczak said in a client note. Roku is in 50% of U.S. broadband households and has "the best product of any streaming aggregator," he said.
BofA Securities kept its buy rating on Roku stock and raised its price target to 93 from 90.
Wells Fargo analyst Steven Cahall reiterated his equal weight rating on Roku stock but upped his price target to 77 from 70.
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