Roku: Good Question, Great Answer

May 09, 2019 4:57 PM ETRoku, Inc. (ROKU)48 Comments


  • I went to Strong Buy March 14 after seeing the potential earnings upside and getting excited about 2020 numbers.
  • After yesterday's earnings, our price target went to $111.
  • But one question and one answer on the call gave us much more conviction and may have helped the stock launch.
  • This idea was discussed in more depth with members of my private investing community, Nail Tech Earnings. Start your free trial today »

We had the opportunity to ask a question on Roku's (NASDAQ:NASDAQ:ROKU) earnings call. It was a simple question, but the answer was oh so sweet. I think it may have helped to catapult the stock, but not sure. The stock was up 8%-9% at the time of the question and the next day kept rising to be up 27%.

Good Question

On Roku's earnings call they managed to slip us in as the last question.

Here's what we asked,

"Our next question comes from the line of Chaim Siegel with Elazar Advisors.

Congratulations on a great quarter. Talking about the EBITDA that you raised your estimates this year. Looking out to next year and kind of the trends with the gross margins and revenues, I'm just wondering if you could talk about profitability going into next year. Looks like that you have some leverage going in your favor."

Before we show their answer, here's what we saw.

If you've read our stuff you know we love to look at the two-year revenue growth rates. We add this year's quarter's revenue growth plus last year's same quarter's revenue growth. That gives us an underlying trend. People don't use it for whatever reason. That's fine by me.

Here's what we saw.

(000) 2017 2017 2017 2017 2018 2018 2018 2018 2019
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Total Net Revenue 100093 99627 124782 188261 136576 156810 173381 275740 206662
1yr 27.6% 18.9% 40.1% 27.8% 36.4% 57.4% 38.9% 46.5% 51.3%
2yr 50.8% 51.5% 73.8% 44.3% 64.0% 76.3% 79.1% 74.2% 87.8%

Notice anything?

Q1 was a breakout quarter. It was the fastest two-year growth rate we've seen. Business is getting better. When we see an accelerating two-year growth rate we can model future quarters to

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This article was written by

Elazar Advisors, LLC profile picture
Author of Fed Trader
Be ahead of markets with a Fed expert.
Hi, I'm Chaim Siegel. I've run Elazar since inception. I've worked for big hedge funds as a trader, analyst, PM and water boy. 
Starting out I could make a mean straight black coffee. But ask me to add some sugar or milk though was a problem. So they got fed up and said, just give him some stocks to follow. That was in the 90s tech boom. Yeah. That worked out. 
So, now, mid-life crisis I enjoy second guessing the Fed, which is usually a good strategy. They are not traders, they have no risk discipline, they are having way too much fun with this QE-QT thing and because of their powerful position, are usually way too over-confident in their decision making which is a hint to bad decision making.
My customers have seen that I've been net net pretty good at consistently second guessing the Fed.
Our EPS estimates factor into Street numbers.
I've been on CNBC and a few other places.
But mostly I really just enjoy second guessing the Fed and keeping it simple.
Wishing you all continued success.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: All investments have many risks and can lose principal in the short and long term. The information provided is for information purposes only and can be wrong. By reading this you agree, understand and accept that you take upon yourself all responsibility for all of your investment decisions and to do your own work and hold Elazar Advisors, LLC, and their related parties harmless. Elazar and its employees do not take individual stock positions to avoid front running and other potential customer related issues.

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