ROKU Stock: There’s a huge upside brewing, achieves record high outpacing competitors

Shares of Roku (ROKU) stock is currently dipping to the downside, however, there is an opportunity for investors looking to get in and there’s a golden nugget hidden within Roku’s earnings report.

Roku’s earnings overview

  • In the first quarter Roku generated $573 million in revenue, up 79% from the same quarter last year.
  • Management estimated $485.5 million, surged from guidance by 16%.
  • Management estimating to outpace Q2 guidance. Estimated revenue for Q2 comes between $550 million to $620 million.
  • Active user accounts are growing, 57 million users current from 27 million in 2018.
  • Average revenue per user (ARPU) continues to increase, currently $33 per user

The future of TV

As cord cutting becomes bigger and streaming gets into the mainstream, you’ll begin to see advertising dollars shift from traditional television systems to CTV systems, in other words, connected television systems. You can already see this happening with Roku.

Roku’s ad platform provides brands with good, measurable returns. So its ad slots are in high demand. And as more advertisers compete for these slots, monetization improves.

What’s hidden in Roku’s earnings report?

There is one number in Roku’s earnings report that most people aren’t talking about, and that’s Roku’s gross margin.

For the past four quarters this number increased, reaching 57% in the latest first quarter, setting it as a record high. In addition, this is a metric measured against cost of goods sold, and it seems that the cost is actually getting lower.

The two segments that Roku operates in are the player segment, which is selling streaming devices and platform segment, which is monetizing with display ads.

The bottom line is, Roku’s revenue is growing at an impressive pace and this revenue increasingly has higher profit potential. And that’s a powerful combination that bodes well for shareholders in the years to come if these trends continue.