Shares of connected-TV platform company Roku (NASDAQ: ROKU) crashed on Friday after the company reported financial results for the fourth quarter of 2023. Many of the company’s numbers were better than anyone expected. But there was still enough concern that investors knocked Roku stock down by 20% as of 9:50 a.m. ET.
Good results weren’t good enough for the market
In Q4, Roku reached 80 million active accounts, a 14% year-over-year increase. This represented 10 million new accounts in 2023, its second-best year ever. And thanks to growth in active users, people streamed over 106 billion hours of content over Roku devices in 2023, up 21%.
From a user perspective, Roku’s growth was good — encouraging, considering how competitive the space is. Unfortunately, the company’s ability to monetize its audience worsened in 2023, which is likely why the market is unpleased today.
Roku’s average revenue per user (ARPU) was $39.92 in 2023, a 4% drop from 2022. What’s discouraging about this is that streaming per user was up, so one would have expected an ARPU increase, not a decrease. The company’s revenue was $984 million, up 14% year over year and ahead of expectations. But there was lower promotional spend for media and entertainment, which kept revenue from reaching its potential.
Roku is looking to the long term
Investors may also be concerned that Roku’s net loss of $710 million was its biggest ever. However, management isn’t concerned and is rather pointing out that it’s free-cash-flow positive and guiding for profits on an adjusted-profitability basis in 2024.
Roku’s management is more concerned with growth, even if it racks up losses. That does make Roku stock a riskier investment. But at least it’s paying off with user growth — adding 10 million new accounts in the past year was surprisingly strong. And it still expects double-digit top-line growth in the upcoming first quarter of 2024, which is nothing to sneeze at.
Much of Roku’s business is still trending in the right direction. That’s what’s important for long-term investors to remember today.
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Jon Quast has positions in Roku. The Motley Fool has positions in and recommends Roku. The Motley Fool has a disclosure policy.
Why Roku Stock Crashed Today was originally published by The Motley Fool
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