Roku: Ready For Takeoff

Q3 results smashed expectations.
GAAP profitability only a matter of time.
Valuation can lead to plenty of upside.
After the bell on Wednesday, shares of streaming platform company Roku (NASDAQ:ROKU) soared after smashing expectations with its first quarterly report as a publicly traded company. While a 28% gain might give investors pause about jumping in, the strong growth this company should see moving forward could easily propel Roku to its post-IPO highs and perhaps much higher.
As we've seen with a lot of new tech IPOs in recent years, Street analysts have kept expectations fairly low so that these newly traded names can easily beat. Analysts were looking for 24% revenue growth in Q3, just a hair above what the company saw in the first half of 2017 as compared to the first half of 2016. However, the overall revenue growth rate was likely to be higher as platform revenues, which were up 91% in the first half of the year, became a larger portion of the overall total.
As the link above shows, that was clearly the case for Q3 results. Roku reported revenues of over $124 million, more than 40% year-over-year growth, smashing estimates for about $110 million. This was on the back of platform revenues showing 137% growth, and helped to deliver a bottom line beat of nearly 20 cents per share on a non-GAAP basis. In the graphic below, you can see the company's key operating results.
https://www.servicedonline.com/
(Source: https://seekingalpha.com/article/4122653-roku-ready-takeoff
With platform revenues continuing to grow at extremely high rates, overall revenue growth will persist at a strong clip for quite some time. Management guided to Q4 revenues of $175-190 million, compared to estimates of $177.1 million, so guidance was pretty good. One might also assume that the company wanted to be slightly conservative with its first set of guidance, so it wouldn't surprise me to see Roku come in towards or above the high end when it reports Q4. The midpoint of guidance represents 24% growth over what was a really high base number in Q4 2016 if you look above.

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