Roku, the independent streaming-TV company that recently staged a successful IPO, is seeing a huge rise in its stock price in midday trading, a day after the company’s first quarterly financial report crushed Wall Street revenue estimates.
Shares of the maker of streaming boxes and dongles connecting viewers to Netflix, Amazon, Hulu and hundreds of other services were trading at $27.50, up a remarkable 46% on triple normal volume. For perspective, the stock closed at $23.50 on its first day of trading September 28, a strong debut that was followed by six weeks of largely downward movement.
On Wednesday, the trajectory changed when the company reported results for the third quarter ending September 30, headlined by a 40% rise in total revenue. That sales number, $124.8 million, exceeded analysts’ consensus by more than 10%, a stellar “beat” by Wall Street standards.
True to the ethos of Silicon Valley, Roku did not book a profit in the quarter. Its net loss widened to $46.2 million, or $8.79 cents a share. Skeptics have questioned whether a founder-run, independent startup — albeit one with many years of growth behind it — can compete long-term with Apple, Google and Amazon, each of which makes streaming TV products. Many analysts therefore view Roku as an appealing acquisition target, though CEO Anthony Wood, a tech pioneer known for inventing the core technology behind the DVR, has said he plans to stay the course.
The quarterly numbers showed many reasons for optimism. Roku reported 16.7 million active accounts, up 48% over a year ago, with half of all new accounts coming via smart TVs. (The company licenses its interface to a range of hardware companies that make Roku-branded TV sets.) Total hours streamed increased 58%, to 3.8 billion.
Mark Mahaney, an analyst with RBC Capital Markets, increased his price target from $26 to $28, maintaining a “sector perform” rating. In a research note, he saluted the “impressive” quarterly results, noting that revenue per user “has doubled in the last two years as Roku has expanded its publisher relationships and developed new ad products.”