Roku shares tumbled on Friday after the streaming video platform missed Wall Street's sales target for the fourth quarter and guided lower for the current quarter and year ahead. It blamed hardware shortages for the miss and cautious outlook. Roku stock plummeted more than 20% on the news.
The San Jose, Calif.-based company said late Thursday it earned 17 cents a share on sales of $865.3 million in the fourth quarter. Analysts had forecast earnings of 5 cents a share on sales of $894 million, according to FactSet. In the year-earlier period, Roku earned 49 cents a share on sales of $649.9 million.
For the current quarter, Roku predicted revenue of $720 million, which is well below Wall Street analyst estimates of $750.9 million.
The company warned that supply-chain disruptions will continue in the consumer electronics sector in 2022.
"Overall TV unit sales are likely to remain below pre-Covid levels, which could affect our active account growth," Chief Executive Anthony Wood and Chief Financial Officer Steve Louden said in a letter to investors.
Roku forecast revenue growth of 35% for 2022. That would translate to full-year sales of $3.73 billion, vs. analysts' target of $3.77 billion. Roku's sales rose 55% in 2021.
Roku Stock Tumbles After Report
On the stock market today, Roku stock dropped 22.3% to close at 112.46. During the regular session Thursday, Roku stock fell 10.4% to 144.71. It hit its all-time high 490.76 last July.
Roku stock has a poor IBD Relative Strength Rating of 7 out of 99. The Relative Strength Rating shows how a stock's price performance stacks up against all other stocks over the last 52 weeks.
In the December quarter, Roku added 3.7 million users, topping Wall Street's target of 3.1 million new accounts. Roku ended 2021 with 60.1 million total active accounts, up 17% year over year.
Roku's platform revenue, mostly advertising, increased 49% year over year to $703.6 million in the fourth quarter. However, its player sales dropped 9% to $161.7 million amid global supply-chain disruptions. But the lower hardware sales boosted earnings since Roku has been taking a loss on streaming device sales in order to grow its user base.
Some advertising segments were strong while others were weak amid supply disruptions in the fourth quarter, Roku said.
"Verticals like restaurants and travel had strong growth, while auto and consumer packaged goods experienced supply-chain disruptions that had a negative impact on their product availability and therefore led to Q4 softness in advertising spend," Wood and Louden said. "In the long term, the advertising upside in the shift to TV streaming remains strong across categories."
Roku To Make Own TVs?
Also, Roku guided to lower profitability in 2022 as it invests in strategic areas. Those areas include the Roku Channel and its advertising business as well as international expansion.
Meanwhile, Roku is exploring a plan to build its own smart televisions, according to a report. The company last month convened a focus group to get consumer feedback on different models, feature sets, names, sizes and price points, Insider reported. Currently, Roku licenses its smart TV operating system to television manufacturers such as TCL and Sharp. Roku also makes set-top boxes and dongles for consumers to access streaming video services.
Rival streaming video platform providers Amazon and Vizio already make their own connected televisions.
Roku stock ranks eighth out of 23 stocks in IBD's Leisure-Movies & Related industry group, according to IBD Stock Checkup. It has a subpar IBD Composite Rating of 35 out of 99.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
