Roku Stock Could Head Higher on Friday

Like a limited series on a streaming service, it seems as if Roku (NASDAQ: ROKU) can't hold investor attention for long. Shares of the company behind the leading operating system for streaming TV soared to a fresh 52-week high after posting blowout financial results in mid-February. The stock has gone on to shed more than a third of its value since that short-lived peak.

The stage could be set for a repeat performance when it reports its first-quarter results after market close on Thursday. Can Roku deliver another stock-popping moment? Can the upticks last longer than last time?

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Let's take a closer look at Roku as it gears up for a critical earnings report this week.

Nothing beats reality TV

Investors know what Roku was initially expecting to deliver in tomorrow afternoon's report. Roku's guidance halfway through the quarter itself calls for revenue of $1.005 billion, a 14% increase from where it landed for the first three months of last year. The forecast calls for a 16% increase in its ad-driven platform business, held back by flat results for its smaller and lower-margin devices segment.

The adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $55 million that it's modeling for the quarter would be a nearly 35% year-over-year jump. It's a substantial sequential dip from last year's holiday quarter, but Roku still expects $350 million in adjusted EBITDA for all of 2025. This is also a 35% increase over full-year 2024 results.

The red ink should continue, but the eye drops keep working. Roku's eyeing a net loss of $40 million for the quarter, translating into a deficit of roughly $0.27 a share on the bottom line. It's an improvement from the $50.9 million net loss -- or $0.35 a share -- it produced in the first quarter of 2024. More importantly, its guidance in February called for break-even results through the final nine months of this year. Keep an eye on how its refreshed guidance turns out later this week.

I like to track analyst moves heading into a telltale earnings report, and the news is initially gloomy for Roku on that front. Two Wall Street pros slashed their price targets by $36 and $25 earlier this week. The good news is that the revised targets of $93 and $100 still represent 34% to 44% in near-term upside for the shares.

Both analysts are sticking to their previously bullish market calls on the shares. One sees an ad recession coming for the connected TV market in a softening economy, but feels that Roku will still be able to live up to its full-year bottom-line guidance. The other sees tariffs leaving a mark on Roku TV sales, but that the streaming pioneer can offset that by boosting its average revenue per user (ARPU) in North America while building out its international footprint.

Image source: Getty Images.

There's always something good on TV

One of the more shocking things about seeing Roku shares trading 34% lower since its Valentine's Day peak is that analyst profit and revenue targets have held firm. They currently see Roku clocking in with a loss of $0.25 a share on $1.01 billion in revenue, marginally better than Roku's own February guidance.

A lot can derail this seemingly breezy setup for a big gain in Roku stock in Friday's trading.

Roku can obviously lower its full-year guidance, concerned about the tariff impact or ad trends. However, the trade war doesn't have to end badly for Roku. If imported TV prices shoot prohibitively higher, Roku can still cash in as folks upgrade their existing TVs by buying cheaper Roku sticks to grow its audience.

The advertising market will take a hit in a softening economy, but connected TV leaders like Roku will still see market share gains as spending shifts away from traditional linear TV missives. It also is worth noting that the world's largest premium streaming TV service kicked off earnings season this month by announcing that its connected TV ad revenue will roughly double in 2025.

Roku heads into this important quarterly update with momentum. It began the quarter with 89.8 million streaming households, and they are more engaged than ever on the platform. ARPU has risen sequentially for four consecutive quarters. You probably spent more time streaming the last three months, and you're not likely alone.

This doesn't have to be a perfect report for Roku to move higher. It just needs to be less flawed than what a 34% sell-off since its last quarterly report's high may seem to suggest.

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Rick Munarriz has positions in Roku. The Motley Fool has positions in and recommends Roku. The Motley Fool has a disclosure policy.