Roku has fared well this year, rising by over 2x since early January, considerably outperforming the broader Nasdaq 100, which remains up by 40% over the same period. The stock also gained 6% over the past month, compared to the Nasdaq which remained largely flat.
There are several factors driving the gains in Roku stock. Roku’s fast-growing operating expenses particularly relating to sales and marketing have been a major concern for investors. However, the company has made some progress in recent quarters with managing costs. Over Q2, the company saw its operating expenses rise by just about 8%, down from an increase of 42% in Q1. Moreover, the company appears to be doubling down on its cost cuts, noting last week that it would lay off about 10% of its total workforce. Moreover, the company also raised its third-quarter revenue outlook to a range of $835 million to $875 million, up from $815 million in the year-ago quarter. The upper end of this guidance indicates that Roku could grow by 15% year-over-year, compared to a growth rate of about 11% over Q2. While the advertising market has been facing headwinds as concerns about inflation and slowing consumer spending hurt spending by marketers on TV advertising, the recent guidance raise could indicate that things are getting better, with subscriber additions potentially picking up.
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