Streaming company Roku (NASDAQ:ROKU) hit a new 52-week low of $62 last week after the company released underwhelming earnings numbers. The company's losses expanded and its forecast was timid as it battles rising costs. Rather than pass along price increases like other companies have been doing, Roku has been absorbing them, and that has impacted its margins significantly.
For the second quarter (period ending June 30), Roku's gross margin percentage was 46.5% compared to 52.4% in the prior-year period. On top of that, the company's operating expenses rose by 73% year over year to $465.7 million. As a result, Roku's operating loss was $110.5 million – nearly five times the $23.5 million loss it incurred in Q1. And it was nowhere near the $69.1 million profit it generated a year ago.
In Q3, the company isn't expecting things to get a whole lot better as it projects revenue of just $700 million, which would represent a year-over-year increase of 3% from Q3 in 2021. And it still expects to finish firmly in the red, with an expected net loss of $190 million.
Inflationary pressures could keep the stock down indefinitely. But if you're a long-term investor, now could be a good time to load up; the last time the stock was trading below $60 for a prolonged period was back in 2019. And the company still has significant potential in the long run as more advertisers gravitate towards streaming TV. Both Walt Disney (NYSE:DIS) and Netflix (NASDAQ:NFLX) will soon be offering ad-based subscription plans, which could result in some near-term catalysts for Roku's growth.
Although the short term doesn't look great for Roku, a few years from now, today's price could look like a steal of a deal for the stock.
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