Roku, Inc. (ROKU) is Drawing Interest from Investors: Key Information You Need to Know

Roku: Recent Performance and Key Insights

Roku (ROKU) has recently become a focal point for investors, drawing significant attention on Zacks.com. If you're considering this stock, it's important to examine the factors that could influence its short-term trajectory.

Stock Performance Overview

In the past month, Roku's share price has declined by 7%, while the Zacks S&P 500 composite index saw a modest gain of 0.6%. The Broadcast Radio and Television sector, which includes Roku, experienced a 3.6% decrease during the same period. This raises the question: what might be next for Roku?

While news headlines and speculation can cause short-term price swings, long-term investors should focus on the company's underlying fundamentals when making decisions.

Earnings Forecast Adjustments

Zacks places significant emphasis on changes in earnings projections, as these revisions often signal shifts in a stock's fair value. When analysts raise their earnings estimates, it typically reflects improving business prospects, which can attract buyers and push the stock price higher. Research consistently shows a strong link between earnings estimate trends and short-term stock movements.

• For the current quarter, Roku is projected to earn $0.34 per share, a remarkable 279% increase from the same period last year. Over the past month, the consensus estimate has surged by 613.3%.
• The full-year earnings forecast stands at $2.10 per share, up 255.9% from the previous year, with a 58.9% increase in the estimate over the last 30 days.
• Looking ahead to the next fiscal year, analysts expect Roku to earn $3.27 per share, a 55.6% rise year-over-year, and the estimate has climbed 30.8% in the past month.

Given these substantial upward revisions and other related factors, Roku currently holds a Zacks Rank #1 (Strong Buy), which is based on a proven, audited methodology that leverages earnings estimate changes to predict price direction.

The following chart illustrates the trend in Roku's forward 12-month consensus EPS estimate:

Revenue Growth Outlook

While earnings are crucial, sustainable growth depends on rising revenues. For Roku, the consensus estimate for current-quarter sales is $1.2 billion, reflecting a 17.9% year-over-year increase. Full-year revenue is projected at $5.51 billion (up 16.3%), with next year's estimate at $6.22 billion (up 13%).

Recent Results and Earnings Surprises

In the most recent quarter, Roku reported $1.39 billion in revenue, a 16.1% increase from the prior year. Earnings per share reached $0.53, compared to a loss of $0.24 a year earlier. These results exceeded the Zacks Consensus Estimate by 3.12% for revenue and 89.29% for EPS. Notably, Roku has surpassed consensus EPS and revenue estimates in each of the last four quarters.

Valuation Analysis

Evaluating a stock's valuation is essential for making informed investment choices. Comparing Roku's current valuation multiples—such as price-to-earnings, price-to-sales, and price-to-cash flow—to its historical averages and industry peers helps determine whether the stock is fairly priced.

The Zacks Value Style Score, which grades stocks from A to F based on a range of valuation metrics, currently assigns Roku a D. This suggests the stock is trading at a premium compared to its peers.

Conclusion

The analysis above, along with additional resources on Zacks.com, can help you decide whether Roku deserves your attention. Roku's Zacks Rank #1 indicates a strong potential to outperform the broader market in the near future.