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Roku (ROKU - Free Report) is set to report first-quarter 2021 results on May 6.

Roku stated that the first quarter is the seasonally softest quarter from the revenue perspective with roughly 25% lower revenues sequentially.

The company expects similar seasonality in the first quarter of 2021 with the midpoint of total net revenues of $485 million indicating an increase of 51% year over year.

The Zacks Consensus Estimate for first-quarter revenues is pegged at $493.32 million, indicating 53.7% growth from the year-ago quarter reported figure.

Moreover, the consensus mark for loss has remained steady at 18 cents per share in the past 30 days. The estimated figure indicates improvement from loss of 45 cents reported in the year-ago quarter.

The company’s earnings beat the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 310.93%.

Let’s see how things have shaped up prior to this announcement.

Roku, Inc. Price and EPS Surprise

Roku, Inc. price-eps-surprise | Roku, Inc. Quote

Factors to Consider

Investor focus will be on active accounts growth, which is an important metric for Roku. The popularity of its free, ad-supported platform, The Roku Channel is expected to have aided active accounts growth in the first quarter of 2021. The ability to access free and premium content on the same platform has been a huge attraction for subscribers.

In the to-be-reported quarter, Roku obtained exclusive global content distribution rights for Quibi’s content, which is expected to have boosted active viewership.

The company’s active accounts jumped 39% year over year to 51.2 million in fourth-quarter 2020. Moreover, ARPU increased 24% to $28.76 (on a trailing 12-month basis).

Notably, the Zacks Consensus Estimate for first-quarter active accounts and ARPU is pegged at $55 million and $30.04, respectively, indicating an increase of 38.2% and 23.4% from the year-ago reported figures.

The expected solid surge in active accounts and viewing may be due to growth in subscription signups, movie rentals and purchases as well as elevated revenues from increased device sales.

Additionally, streaming hours growth is expected to have boosted TV streaming advertising on Roku’s platform. The consensus mark for streaming hours stands at 18.22 billion, implying an increase of 38% from the year-ago quarter’s reported figure.

The addition of Peloton app, Peloton Interactive’s virtual fitness platform for Roku streamers is also expected to have aided growth in streaming hours.

Further, the availability of streaming services — Apple TV+, Disney+ and Peacock streaming services — on Roku’s platform is expected to have aided Platform revenues, which accounted for 72.5% of revenues in the fourth quarter.

Markedly, first-quarter platform gross profit is expected to be $238 million at the midpoint.

The consensus mark for Platform revenues is pegged at $384 million, indicating growth of 64.8% from the figure reported in the year-ago quarter.

Improving Advertising Business to Aid Top Line

Moreover, the growing popularity of The Roku Channel is expected to have attracted advertisers in the to-be-reported quarter. Also, the acquisition of Dataxu (a demand-side advertising platform) is expected to have strengthened the company’s OTT advertising roadmap.

Meanwhile, the advertising business is expected to have witnessed delayed starts in video ad campaign, primarily from categories including travel, quick-serve restaurants and automotive among others that were severely hit by coronavirus-induced stay-at-home policies.

Nonetheless, Roku is expected to have benefited from advertising spend reallocation toward TV streaming as marketers accelerate their shift out of traditional TV and into TV streaming.

On Mar 23, Roku announced the launch of an advertising brand studio to produce new creative ad formats and TV programming tailored for marketers.

During the first quarter, Roku announced a strategic partnership with Nielsen to integrate complementary Nielsen ad and content measurement products into the Roku platform and further advance Nielsen ONE, the company’s cross-media measurement solution.

Additionally, Roku entered into an agreement to acquire Nielsen’s Advanced Video Advertising (AVA) business, which includes Nielsen’s video automatic content recognition (ACR) and dynamic ad insertion (DAI) technologies. The acquisition will accelerate Roku’s launch of an end-to-end DAI solution with TV programmers.

Moreover, product innovations in solutions like the Shopper Data Program with Kroger are expected to have driven monetized video ad impressions growth in the fourth quarter.

Further, increasing advertiser demand for new products offered by the company such as incremental reach guarantees and Roku’s OneView ad platform are expected to be key catalysts. The ad platform is designed to help advertisers use TV identity data to create ads across OTT, desktop and mobile from a single hub.

However, the bottom line is expected to have been weighed down by cost escalations, resulting from increased marketing expenses related to international expansion and content additions in the to-be-reported quarter.

What Our Model Says

According to the Zacks model, the combination of a positive Earnings ESP and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Roku has an Earnings ESP of 0.00% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.