Roku is a 'runaway train,' analyst says, stock hits all-time high

Key Points
  • Roku reported second quarter results that surpassed analysts expectations and showed strong growth in advertising on the platform.
  • The company reached 30.5 million active users during the quarter, up 39% from the same period last year.
  • Analysts at Rosenblatt upgraded the stock and called Roku TV a "runaway train" compared to Amazon's Fire TV.
Roku CEO Anthony Wood on tariffs and streaming

Shares of Roku skyrocketed 20.8% on Thursday, a day after the company reported second quarter results that topped expectations. The stock surged as much as 22% to hit an all-time intraday high of $123.45.

The company reported a loss of 8 cents per share, which was narrower than the loss of 22 cents per share projected by analysts. Revenue grew 59% year-over-year to $250 million, surpassing consensus estimates of $224 million.

Roku said it reached 30.5 million active users during the quarter, up 39% from the same period last year and 1.4 million more than it had in the prior period. Average revenue per user (ARPU) hit $21.06, up $2.00 from the first quarter of 2019.

The outperforming results pushed Rosenblatt analysts to upgrade Roku shares to buy from neutral, citing the company's "second consecutive trifecta" of growth in active accounts, ARPU and streaming hours.

Investors have been increasingly concerned that Roku could be overwhelmed by competition in the streaming TV ad space. Cheddar reported in April that Amazon plans to boost its advertising on TV products, seeking millions of dollars from advertisers to help Fire TV better compete with Roku and Pluto TV. Amazon also recently announced a deal to allow third-party ad companies like The Trade Desk and Dataxu to sell ads on Fire TV.

Rosenblatt said Roku's latest quarterly results prove that it has been able to withstand the pressure from competitors.

"While Amazon will always be an imminent threat, Roku TV is a runaway train, with many retailers we talk to suggesting it consistently outsells Fire TVs by 4-5x," Rosenblatt analyst Mark Zgutowicz wrote in a note. "We see ROKU's brand positioning continuing to snowball from here."

Roku attributed its accelerating revenue to growth in advertising, with Roku's monetized video ad impressions more than doubling year-over-year. The company also expects it will benefit from the onslaught of streaming services being launched by the likes of Disney and NBCUniversal.

The company has also faced some questions about the threat of new tariffs that could be implemented by the Trump administration.

In an interview with CNBC, Roku CEO Anthony Wood said it would be hard to predict the result of possible tariffs, but that they're unlikely to leave a lasting impact.

"For us, the big picture really is that anything that happens with short-term tariffs doesn't impact the long-term potential of our business," Wood said.

On the company's earnings call, Wood also said the company is "taking steps to mitigate any potential impact," including relocating manufacturing over time.

Disclosure: NBCUniversal is the parent company of CNBC.

Roku beats estimates on revenues, posts full-year guidance above expectations