Roku, Inc. (NASDAQ:ROKU) just released its latest quarterly results and things are looking bullish. Revenues and losses per share were both better than expected, with revenues of US$881m leading estimates by 3.2%. Statutory losses were smaller than the analystsexpected, coming in at US$0.35 per share. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the current consensus from Roku's 28 analysts is for revenues of US$3.92b in 2024. This would reflect a solid 8.1% increase on its revenue over the past 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 52% to US$1.92. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$3.89b and losses of US$1.99 per share in 2024. So there seems to have been a moderate uplift in analyst sentiment with the latest consensus release, given the upgrade to loss per share forecasts for this year.
The consensus price target fell 5.1% to US$78.99despite the forecast for smaller losses next year. It looks like the ongoing lack of profitability is starting to weigh on valuations. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Roku, with the most bullish analyst valuing it at US$110 and the most bearish at US$50.00 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It's pretty clear that there is an expectation that Roku's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 11% growth on an annualised basis. This is compared to a historical growth rate of 26% over the past five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 8.2% per year. So it's pretty clear that, while Roku's revenue growth is expected to slow, it's still expected to grow faster than the industry itself.
The Bottom Line
The most important thing to take away is that the analysts reconfirmed their loss per share estimates for next year. Fortunately, they also reconfirmed their revenue numbers, suggesting that it's tracking in line with expectations. Additionally, our data suggests that revenue is expected to grow faster than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Roku analysts - going out to 2026, and you can see them free on our platform here.
However, before you get too enthused, we've discovered 2 warning signs for Roku that you should be aware of.
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