Roku shares climb 10% on strong growth in streaming hours during coronavirus

Key Points
  • Roku reported strong growth in streaming hours Monday as more people spend time at home during the coronavirus pandemic. 
  • The company raised its first quarter guidance but pulled its full year outlook due to uncertainty around the pandemic.
  • Analysts still fear weakness in the U.S. ad market further into the year, they said in notes following the report.

In this article

Anthony Wood
David Orrell | CNBC

Shares of Roku closed 10% higher Tuesday after the company reported growth in streaming hours as more people spend time at home during the coronavirus pandemic. 

The move added around $1.2 billion to Roku's market cap, bringing it around $12.8 billion.

In its earnings report Monday, Roku said it expects Q1 revenue to be slightly higher than expected in its previous guidance, though it withdrew its full-year guidance in light of uncertainty around the crisis. It expects total net revenue for the first quarter to land between $307 million and $317 million, higher than its previously expected midpoint of $305 million.

Roku also estimated a net increase of 3 million active accounts from December 31 to March 31, reaching 39.8 million. It also said it expects streaming hours to increase 49% year-over-year to 13.2 billion. Streaming hours during the fourth quarter of 2019, by comparison, were 11.7 billion.  

In notes following Roku's report, analysts noted the strong growth metrics but also cautioned about the uncertainty of the advertising market moving forward into the crisis. 

"Since Roku sells most of its advertising inventory at least 30 days in advance, we think there was less exposure to the industry wide slowdown in digital advertising, but we would expect some advertisers to negotiate cancellations," Oppenheimer analysts wrote Tuesday, upgrading its price-target from $110 to $120 with an outperform rating. 

Needham analysts maintained a buy rating on the stock, but lowered their 12-month price target from $200 to $150, citing "growing uncertainties about the timing and shape of an economic recovery in 2021" that could have implications on U.S. advertising growth. The firm raised its Q1 estimates based on the guidance, but lowered second quarter and full year 2020 forecasts based on projected weakness in the ad market.

-CNBC's Megan Graham contributed to this report.

Subscribe to CNBC on YouTube.

WATCH: Here's the upside to Netflix losing its 2019 gains

Here's the upside to Netflix losing its 2019 gains
Upside to Netflix losing its 2019 gains