What Happened:
Shares of streaming TV platform Roku (NASDAQ: ROKU) jumped 8.87% in the morning session after the company announced it is laying off about 10% of its workforce and also limiting new hiring as part of its efforts to bring down the yearly operating expense growth. Roku expects a restructuring charge of $45 million to $65 million related to the job cuts, and most of the restructuring charge will be incurred in Q3'2023. The company also expects an impairment charge of $160 million to $200 million in the third quarter as it consolidates some offices. As a result, the company now expects adjusted EBITDA in the range of negative $40 million to negative $20 million, an improvement compared to the previous expectation of negative $50 million.
Lastly, Roku raised its revenue guidance for the third quarter of 2023 to $835 million to $875 million, ahead of Wall Street's projections. Overall, the updated guidance should give investors more reason to stay optimistic.
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What is the market telling us:
Roku's shares are very volatile and over the last year have had 47 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was about one month ago, when the company gained 13.5% on the news that the company reported second quarter results that blew past analysts' revenue expectations, partly driven by a beat in Active Accounts and partly by revenue per Active Account. The company observed improvements in some ad verticals, which is encouraging in the face of growing worries about inflation and sluggish economic growth. Additionally, adjusted EBITDA beat expectations, and the company stressed the commitment to deliver positive adjusted EBITDA for the full year 2024. The only minor negative we found was that revenue decelerated. Overall, we think this was a really good quarter that should please shareholders.
Roku is up 118% since the beginning of the year, but at $88.62 per share it is still trading 9.09% below its 52-week high of $97.49 from July 2023. Investors who bought $1,000 worth of Roku's shares 5 years ago would now be looking at an investment worth $1,390.
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