- Share price surges 21% in one day
- Market cap increases by $1.2bn
- CFO Louden believes Roku has excellent long-term potential
Experienced traders have long known that a strong earnings report can send a firm’s stock price through the roof overnight.
In the case of Roku, it appears the market is finally starting to realize the true profit potential of this streaming content service.
The company’s share price surged by 21% yesterday after it published strong Q2 data and a positive outlook for the year. In fact, Roku’s market capitalization increased by $1.2bn within a matter of hours.
The company’s stock price is now within reach of its all-time high of $58.80, which it reached last December.
Wall Street has now zoomed in on the firm’s huge profit potential as it enlarges its user base and grows its average yearly revenue.
Roku CFO Steve Louden summarized why the marked responded so vigorously when he said: “We think there is a massive opportunity long-term.”
Responding to a journalist’s questions about the firm’s earnings potential, he added that Roku was continuously making investments in marketing, research and development with the aim of expanding the company’s future earnings potential.
These type of expenditures are holding back the firm’s net profit levels to a certain extent, at least in the short run. Over the longer term, however, Roku might well duplicate Amazon’s performance.
Louden added: “Not to talk about Amazon’s trajectory, but certainly we can slow down investment in the business and that would pop some incremental margins to the bottom line.”
He went on to say that when they eventually gain more scale and the relative importance of investment declines, there is a significant amount of leverage in the company over the long term.
