Roku Facing Account Growth Headwinds, Has Ad Growth Potential: Analyst

Wedbush expects Roku to announce 800,000 net active account additions for Q2, an increase of 1.3% sequentially, when the streaming media platform company announces quarterly results Thursday, said analyst Michael Pachter in a Tuesday investor note. That would be the lowest sequential or annual account growth for Q2 since 2016, owing to supply chain disruptions and lower TV demand, Pachter said. Despite lower overall viewership as people spend more time outside the home, plus cuts to streaming subscriptions, Q2 advertising budgets continued to migrate toward streaming platforms, he said. In Q1 the top 10 broadcast TV advertisers spent about 80% more on Roku than in the year-ago quarter and 7% less on legacy TV, a trend he expects to carry through the year. “There is significant room left for domestic growth since streaming platforms currently capture around 46% of U.S. audience TV viewing time, but only receive 18% of advertisers’ TV ad budgets, said the analyst. Roku continues to invest heavily in global expansion, while securing partnerships to bolster its ad-supported Roku Channel offering, Pachter noted: “While Roku’s share price has been penalized for its reduced profitability, we think Roku’s investments are prudent and will pay off over the long-term.” Shares fell 7.9% Tuesday to close at $79.87.