Roku (Nasdaq: ROKU) shares were 22% lower following the company's Q4 earnings report. The company missed expectations on the top line but beat on the bottom line. However, shares were under pressure on its weak guidance for Q1.
Up till last year, Roku had been one of the best-performing growth stocks in the market as their business boomed along with the increasing popularity of streaming services and people getting rid of their cable subscriptions. As a result, Roku's stock gained more than 3,000% from its IPO in September 2017 to it's all-time high in July of last year. Since that peak, the stock is down by 77% due to a combination of slowing revenue growth and outflows from growth stocks.
Inside the Numbers
In Q4, Roku reported $0.17 in earnings per share which were better than expectations of a $0.09 per share profit. However, revenue missed expectations at $865.3 million, vs. $894.0 million. This was a 33% increase from last year which is a deceleration from the previous quarter's 51% gain and 81% for Q2.
Roku sees this deceleration continuing with $720 million in Q1 revenue which equates to a 25% revenue growth. This was below analysts' expectations of $749 million. It also sees mid-30s revenue growth for the full year which was in line with analysts' expectations.
The company attributed some of its weak performance due to supply chain issues that affected the sale of new TVs. According to Anthony Wood, Roku's CEO: "Similar to Q3, overall U.S. TV unit sales in Q4 fell below pre-COVID 2019 levels. Some of our Roku TV OEM partners were hit particularly hard with inventory challenges, which negatively impacted their unit sales figures and market share in Q4."
In Q4, Roku had 60.1 million active accounts, a 17% increase from last year and above expectations of 59.5 million accounts. The company also saw a shrinking of gross margins in its largest segment, Platform, compressed from 65% to 60.5%.
The 77% drop in Roku's stock price has clearly made its stock price more attractive from a valuation basis. But, it's simply not cheap enough for value investors at this point given its $15 billion market cap and $2 billion in revenue. While the stock could certainly have some bounces, it's likely not done going down yet.