Roku Q4 Review: A Little Bit of Celebrating, A Little Bit of Hedging

Cheyne Gateley/VIP

Roku had both a strong Q4 and 2020. 

Well, that’s according to Roku, which said as much verbatim in its letter to shareholders showing the connected TV device maker generated revenue of nearly $650 million, beating analyst expectations of $615 million, per FactSet.

Roku’s Q4 EPS of $0.49 also came in ahead of analyst expectations of a loss of 6 cents a share. 

A continued trend for one of the market’s most dominant streaming device manufacturers was the increasing prominence of platform revenues to Roku revenue. Platform revenue, which includes ad sales, accounted for nearly 75% of Roku’s overall revenue in Q4 ’20, up from 63% from the same period in 2019.   

Wall Street reacted positively to the news. Aside from the number of congratulatory “great quarter” compliments by analysts to Roku on its Q&A, Roku’s stock rose more than 3% in after-hours trading.  

Promisingly for Roku bulls, the company projected Q1 revenue higher than analyst estimates.  

Ialso stated it expects strong financial comparisons for H1 ’21 vs. H1 ’20 in its shareholder letter but shortly after couched this statement by projecting its total 2021 revenue growth would be lower than the revenue growth it expects to see during the first two quarters of 2021 due to its strong performance in the second half of 2020. 

The company also touted its recent deal for Quibi programming (which did boost the stock when initially reported), saying it was produced by some of “the greatest talent in Hollywood,” though it stopped short of committing to an exact date on when Roku users might be able to start seeing that content.  

Moreover, when asked about that deal during Roku’s first question in its earnings Q&A, Roku mentioned the Quibi deal fit its strategy to growing the Roku Channel but also that it’s always adding content to that channel from different sources, like Disney and ABC, almost playing down the individual importance of the Quibi library.  

Those following Roku’s earnings might have been frustrated by the company’s generally vague approach to discussing future content plans, especially after Protocol recently reported Roku will finally push into original content.  

However, this approach to not yet get too specific on its future original content plans, in addition to warning of a slowdown in revenue growth in H2 ’21, was a smart way to manage expectations, which can often be unrealistic among investors.  

The approach of part celebration/part hedging is reminiscent of Netflix’s Q1 earnings call last year, when it destroyed its subscriber guidance but in its shareholder letter had each mention of its subscriber surge couched to convey how fleeting it was going to be.

Media giants Discovery and ViacomCBS are both set to report next week, and it seems likely we’ll see Roku’s approach of carefully celebrating growth while warning of future-quarter slowdowns be mimicked to some degree then.