Streaming platform Roku’s shares slump on dour holiday-quarter forecast

Shares of Roku Inc fell more than 20% in extended trading on Wednesday after the streaming platform forecast holiday-quarter revenue below Wall Street estimates as ad spending dries up.

Record-high inflation and global geopolitical uncertainty from the war in Ukraine and U.S.-China tensions have led companies to slash their marketing budgets, causing trouble for digital advertisers.

Top players including Google-parent Alphabet and Snap Inc have warned of shrinking ad spending, which led to a broad tech sell-off in recent weeks.

“As we enter the holiday season, we expect the macro environment to further pressure consumer discretionary spend and degrade advertising budgets, especially in the TV scatter market,” Roku Chief Executive Officer Anthony Wood said in a letter to investors.

“We expect these conditions to be temporary, but it is difficult to predict when they will stabilize or rebound.”

The company expects total revenue to be about $800 million in the fourth quarter, down from $865.33 million a year earlier and below analysts’ average estimate of $895.5 million, according to Refinitiv IBES.

Roku added 2.3 million “active accounts” in the third quarter, compared with 1.3 million net additions last year. Meanwhile, Netflix attracted 2.4 million new subscribers worldwide in the quarter.

“Roku’s growth will be disrupted by a recessionary environment because advertising budgets on the whole will see cuts, while at the same time TV ad budgets continue to see migration to digital,” Third Bridge analyst Jamie Lumle said.

The company reported a net loss of $122.2 million, or 88 cents per share, compared to net profit of $68.94 million, or 48 cents per share, a year earlier.

“We will continue to slow headcount and operating expense growth in response to the macro environment,” Wood added.

Separately, Roku said its financial chief, Steve Louden, will leave the company sometime in 2023. Reuters