🤯 Have you seen our AI stock pickers’ 2024 results? 84.62%! Grab November’s list now.Pick Stocks with AI

Spotify Vs. Roku: Which Recent IPO Had The Better Earnings Report?

Published 05/10/2018, 05:03 AM
Updated 07/09/2023, 06:31 AM
AAPL
-
AMZN
-
ROKU
-
SPOT
-

Spotify (NYSE:SPOT) and Roku (NASDAQ:ROKU) are two of the hottest recent IPOs on the market, intriguing investors on when to get in and when to cash out. On May 2, Spotify released its Q1 earnings report, with Roku following suit soon after. Let’s look into these two filings to see which recent IPO stock had the better earnings report.

Roku

On Wednesday, Roku reported Q1 losses of $0.07 per share and revenue of $136.6 million, beating both of our Zacks Consensus Estimates. The stock opened higher at $38.28 but has since fallen to basically flat on the day.

The company raised its 2018 revenue guidance and now expects net sales of $685 to $705 million, citing what it feels is strong momentum and a dominating position in an industry with favorable trends.

On top of this, gross margins are expected to increase as well. Full-year 2017 results had margins at 39%, while guidance puts 2018 gross margins between 42.3% and 43.3%. Although this is the case, Roku expects to end the year with net losses almost twice as much as last year.

Spotify

Last week, Spotify reported disappointing revenue of $1.36 billion. The stock dropped 7.5% in after-hours trading following the report’s release. Since the report, share prices have dropped 11.72%.

Although the company improved year-over-year, with a 37% increase in revenue, there were some concerning statistics—one notably being the breakdown of its revenue. Advertising revenue was a mere 9.8% of comparative revenue brought from subscribers. This marks a 22% decrease when compared to the previous quarter.

Breakdown

Spotify and Roku are in similarly negative positions within the investing world. Short-term volatility is expected with recent IPOs, and their outlooks on the future act as the main determinant for which stock performed better.

Both companies provided full year expectations. Roku positively adjusted its guidance, increasing predicted revenue for the year, while Spotify kept its consistent with previous estimates. This could be an indicator of soon-to-come earnings estimate revisions, aligning with the respective companies’ ideas for their own progress.

Along with this, Roku’s current position within an industry that is rapidly changing in its favor provides investors with a trend to get behind. A continued shift away from traditional TV and Roku’s leading position within this industry will most likely provide positive investor and analyst sentiment and improving outlooks for the company.

Spotify is currently leading the ambiguous music streaming industry. Roku has the advantage of a rapidly growing industry which provides enough room for multiple companies within it to grow; the same cannot be said with Spotify. The music streaming industry is packed with competitors such as Apple (NASDAQ:AAPL) Music—which is quickly catching up to Spotify, as well as Pandora and Tidal.

Customer acquisition is also a big advantage that Roku has. Because the company’s industry is growing so quickly, there is more room for acquiring new users, reflective in its 47% increase in active accounts year-over-year. This dominates the 30% increase seen in Spotify’s monthly active users.

Bottom Line

Roku and Spotify are both sporting a Zacks Rank #3 (Hold). The companies recently released earnings reports, with both posting some metrics that disappointed some investors.

But with the TV streaming industry rapidly growing, and Roku’s dominating position within it, it holds a growing advantage over Spotify in terms of strength among these recent IPOs.

Combine this with higher gross margins, faster user growth, and improving full year outlooks, and it seems that Roku might have had the better earnings report.

Wall Street’s Next Amazon (NASDAQ:AMZN)

Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.

Click for details >>



Apple Inc. (AAPL): Free Stock Analysis Report

Roku, Inc. (ROKU): Free Stock Analysis Report

SPOTIFY TECH SA (SPOT): Free Stock Analysis Report

Original post

Latest comments

Loading next article…
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.