Roku Set to Become $1B Company in 2019, Plans Course for International Expansion

Did tour de force Q4 earnings report convince Wall Street that OTT company isn't so 'uninvestable' after all?
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Driven by the rapid growth of its advertising supported video platform, Roku reported a 46% rise in fourth quarter revenue to $275.7 million, beating analyst forecasts.

Roku Ultra 16x9

Capping a 2018 during which the Silicon Valley OTT company saw its stock price grow to $76.48 in October, before nadiring out at $27.17 in December, Roku finished up with a 45% rise in total revenue to $742.5 million.

As of mid-day NASDAQ trading on Friday, Roku shares are up more than 20% since its Thursday earnings report to nearly $63 a share.

Now, the question is, is Roku’s stock up there to stay?

Truly, it has been a wild ride for the company, which last year began selling more advertising on its platform than it did OTT gadgets, which put the company in business way back in the early 2000s.

Related: Roku Reports 27M Active Accounts, Sends Stock Up Over 25%

Platform revenue increased 85% year over year for Roku in 2018, reaching $416.9 million, which accounted for more than 56% of total revenue. In the fourth quarter, platform revenue reached an all time high for the company, $151.4 million, a whopping 77% year over year increase.

This is being driven by rapid growth of the Roku user and engagement. Roku added 7.8 million active accounts in 2018, reaching 27.1 million at year end. Total hours spent streaming on the platform increased by 9.2 billion to 24 billion. Average revenue per user (ARPU) increased by $4.17 to $17.95.

Roku’s gross profit was up 66% for the year to $332.1 million.

Beyond being the market leader in OTT devices that you hook up to your TV’s HDMI port, the Roku operating system drives one in four smart TVs.

During Thursday’s earnings call, CEO Anthony Wood even discussed international expansion plans.

“We believe many of the assets we built for the U.S. market will help us expand into other markets. And clearly streaming is a global opportunity with one billion households worldwide. And that put us more International than domestic subs,” Wood told investors.

With ad-supported Roku Channel driving so much growth and expansion potential, how did the stock fall so far?

Concerns about tariffs on Chinese electronics factored into the company’s steep slide from October through early January. But more than that, it was concern that much larger technology companies like Apple would swoop in very quickly vanquish Roku in key markets like smart TVs.

As CES got underway in early January, for example, Citron Research labeled Roku “uninvestable” after Apple signed a deal to enable Samsung smart TVs to access the iTunes store.

Then again, Apple TV has competed in the OTT device market for a decade alongside Roku, and the latter has managed to carve out the leadership position. 

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