Roku (NASDAQ:ROKU) is anticipated to disclose its Q1 2025 earnings around May 1, covering a quarter that is expected to see the company continue to gain from an expanding user base and increased advertising revenue. Revenue is expected to rise by approximately 14% year-over-year to $1.01 billion, according to consensus estimates, while losses are predicted to amount to -$0.25 per share, which is slightly better than the previous year.
Roku announced that it had a total of 90 million subscribers by early January, indicating an approximate year-over-year growth of 12.5%. This growth is likely to contribute to expanding the platform business, which markets digital video subscriptions and advertisements on Roku devices. Roku’s improved engagement may also facilitate higher advertising revenue. In Q4, streaming hours reached 34 billion, marking an 18% increase year-over-year.
Roku’s current market capitalization stands at $8.5 billion. Its revenue over the past twelve months was $4.1 billion, and it experienced operational losses of $-218 million alongside a net income loss of $-129 million. However, for those looking for upside potential with less volatility than single stocks, the Trefis High-Quality portfolio offers an alternative, having outperformed the S&P 500 and delivered returns surpassing 91% since its inception.
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Roku’s Historical Odds Of Positive Post-Earnings Return
A few insights on one-day (1D) post-earnings returns:
- Over the last five years, there have been 20 earnings data points recorded, with 9 positive and 11 negative one-day (1D) returns noted. In summary, positive 1D returns were witnessed approximately 45% of the time.
- Interestingly, this percentage rises to 50% when focusing on data from the last 3 years instead of 5.
- The median of the 9 positive returns is 12%, while the median of the 11 negative returns is -7.9%
Additional data on the observed 5-Day (5D) and 21-Day (21D) returns following earnings is compiled along with the statistics in the table below.
Correlation Between 1D, 5D, and 21D Historical Returns
A relatively lower-risk strategy (though not beneficial if the correlation is weak) involves understanding the correlation between short-term and medium-term returns following earnings, identifying a pair with the highest correlation, and executing the appropriate trade. For instance, if 1D and 5D indicate the highest correlation, a trader can position themselves “long” for the next 5 days if the 1D post-earnings return is positive. Below is some correlation data based on both 5-year and 3-year (more recent) historical data. Note that the correlation 1D_5D refers to the relationship between 1D post-earnings returns and the subsequent 5D returns.
Is There Any Correlation With Peer Earnings?
At times, the performance of peers can impact the post-earnings stock reaction. In fact, pricing might start before the earnings are announced. Here is some historical data comparing Roku’s post-earnings performance with that of peers who reported earnings just prior to Roku. For a fair comparison, peer stock returns also reflect post-earnings one-day (1D) returns.
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