Dj Chmn Wood Sells 25000 Of Roku Inc >Roku

The Trade Desk TTD reported third-quarter 2024 non-GAAP earnings of 41 cents per share, beating the Zacks Consensus Estimate by 2.5% and increasing 24.2% year over year.

TTD’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed once, the average earnings surprise being 6.09%.

The Trade Desk Price, Consensus and EPS Surprise

The Trade Desk price-consensus-eps-surprise-chart | The Trade Desk Quote

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Revenues of $628 million surpassed the Zacks Consensus Estimate by 1.31%. The top line soared 27.3% year over year.

Following third-quarter 2024 results, TTD shares fell 5.58% to close at $125.13 on Friday. The Trade Desk shares have appreciated 73.9% year to date, outperforming the Zacks Computer and Technology sector’s return of 30%.

However, TTD shares are expected to benefit from growing market share in the Connected TV (CTV) domain, which was its fastest-growing channel in the third quarter of 2024. A rich partner base that includes the likes of Disney DIS, Comcast’s CMCSA division NBCU, Walmart, Roku ROKU, LG, Netflix and others is a key catalyst.

TTD Expands CTV Partnerships and UID2 Adoption

TTD is benefiting from an expanding global footprint, continuing development of the omnichannel ad inventory and strong adoption of programmatic advertising.

North America represented about 88% of The Trade Desk’s third-quarter revenues and international represented about 12% in the third quarter of 2024.

In third-quarter 2024, customer retention remained at more than 95%.

Expanding partner base is a major growth driver. Spotify extended its partnership with TTD, piloting integrations with OpenPath and UID2 through the Spotify Ad Exchange.

TTD is signing more multiyear joint business plans (JBPs) with leading agencies and brands. More than 40% of the company’s business this year will fall under JBPs, which improves revenue visibility.

TTD won several new clients in the third quarter of 2024. Reach, a UK news publisher of 130 media brands, adopted EUID to enhance ad experiences while also protecting journalism.

Global media company Motorsport Network adopted EUID to offer relevant ads to its 60 million users, focusing on privacy and transparency.

Cint also integrated UID2 for enhanced and omnichannel brand lift measurement.

Roku announced its adoption of UID2 to enhance advertiser targeting precision and enable secure data collaboration through Roku Media.

TTD’s Operating Margin Improves

Adjusted EBITDA in the third quarter of 2024 rose 28.8% year over year to $257 million. Adjusted EBITDA margin was 40.9%, which expanded 50 basis points (bps) on a year-over-year basis.

Operating expenses increased 14% year over year to $519.5 million. The upside was caused by higher Platform operations expenses.

Operating income was $108.5 million compared with the year-ago quarter’s reported figure of $37.7 million.

TTD’s Balance Sheet and Cash Flow Remain Strong

As of Sept. 30, 2024, cash and cash equivalents were $1.21 billion compared with $1.01 billion on June 30, 2023.

Net cash from operating activities was $273 million in the third quarter compared with the second-quarter 2024 figure of $81 million.

The company repurchased $54 million of its Class A common stock in the third quarter of 2024. As of Sept. 30, 2024, The Trade Desk had $521 million available and authorized for repurchases.

TTD’s Q4 Guidance Positive

For fourth-quarter 2024, The Trade Desk expects revenues to be $756 million, which suggests growth of about 25% on a year-over-year basis.

TTD anticipates adjusted EBITDA to be nearly $363 million.

The Zacks Consensus Estimate for fourth-quarter 2024 revenues is pegged at $753.61 million, indicating year-over-year growth of 24.4%. The consensus mark for earnings is pegged at 57 cents per share, unchanged over the past 30 days and suggesting 39.02% growth year over year.

The Zacks Consensus Estimate for TTD’s 2024 revenues is pegged at $2.46 billion, indicating year-over-year growth of 26.49%. The consensus mark for earnings is pegged at $1.63 per share, unchanged over the past 30 days and indicating 29.37% growth year over year.

TTD Shares: Buy, Sell or Hold Post Q3 Earnings?

The Trade Desk’s strong portfolio and expanding partner base are positive. The growing footprint in the retail media is a tailwind for TTD’s prospects. Its AI-powered solution, Kokai, is helping advertisers identify and target new potential customers with much greater precision.

Hence, investors who already own the stock might expect the company’s growth prospects to be rewarding over a longer term.

The technical indicator is also bullish for The Trade Desk as the shares trade above the 50-day and 200-day moving averages, indicating robust upward momentum.

TTD Shares Trade Above 50-Day & 200-Day SMA

However, The Trade Desk’s Value Score of F suggests a stretched valuation at the moment.

Currently, TTD is trading at a premium, with a forward 12-month Price/Sales of 21.13x compared with the sub-industry’s 6.25x.

Price/Sales Ratio

The Trade Desk carries a Zacks Rank #3 (Hold), which implies investors should wait for a more favorable entry point to accumulate the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Zacks Investment Research

Netflix NFLX shares have appreciated 63.3% year to date (YTD), outperforming the broader Zacks Consumer Discretionary sector’s appreciation of 8.6%.

It has also outperformed the Zacks Broadcast Radio and Television industry’s appreciation of 37.3% year to date.

NFLX shares’ outperformance can be attributed to its growing subscriber base, driven by expanding local and international content offerings and increasing engagement levels.

The company had 282.72 million paid subscribers across 190 countries globally at the end of the third quarter of 2024 and it expects paid additions to increase in the fourth quarter due to normal seasonality.

Netflix is benefiting from its expanding domestic and international content offerings that are aiding in driving user growth. NFLX’s investment in creative communities in India, Japan, Thailand, Korea and other international markets is improving user retention and driving top-line growth.

Netflix, Inc. Price and Consensus

Netflix, Inc. price-consensus-chart | Netflix, Inc. Quote

At the end of the second quarter of 2024, user engagement was reported to be 2 hours of viewing per member per day.

Netflix’s Expanding Indian Portfolio to Benefit Prospects

NFLX recently announced the trailer of Nayanthara: Beyond the Fairytale, a documentary set to launch on Nov. 18, 2024. The documentary will feature narrations from Vignesh Shivan, Rana Daggubatti, Taapsee Pannu, and Nagarjuna Akkineni and will give viewers a peek into the Lady Superstar’s magical life.

Netflix’s strategy to drive its active user base is focused on regional programming and a diversified foreign language content portfolio. Netflix India’s Maharaja, a historical drama film starring Vijay Sethupathi and Anurag Kashyap, generated a viewership of 22.6 million after its release in June 2024 and is one of the studio's most viewed productions.

Apart from India, Netflix is releasing content for several other international locations like Japan, Korea, Brazil and Thailand, to name a few.

The company is set to launch two of its biggest Latin American shows in December 2024. Senna, a biopic of one of the greatest Formula One drivers from Brazil and A Hundred Years of Solitude, a show based on Gabriel García Márquez’s novel from Colombia, are some anticipated hits that are expected to increase on-demand viewership in the area in the fourth quarter of 2024 and thereby drive topline.

In the fourth quarter of 2024, Netflix’s returning series Squid Game S2 and Outer Banks S4, as well as Black Doves, a drama starring Keira Knightley, are expected to drive the top line by increasing user retention and subscription prospects.

Netflix’s efforts to deliver customized content to viewers by developing and improving monetization and refined plans and pricing aids prospects. While NFLX has increased prices in EMEA countries, it has also altered prices in Spain and Italy.

Further, Netflix’s recent offerings in the live event market have strengthened its leadership position as a streaming service provider by expanding its footprint to engage with customers who are inclined toward live television.

Mike Tyson and Jake Paul boxing match set to take place on Nov. 15, 2024, and Christmas Day NFL games, with the Kansas City Chiefs against the Pittsburgh Steelers and the Baltimore Ravens against the Houston Texans, are some of its unscripted and high-value live events that are expected to positively impact the on-demand viewership hours in the fourth quarter of 2024.

Netflix’s Guidance Positive

For the fourth quarter of 2024, Netflix expects revenues to be $10.12 billion, indicating an increase of 15% year over year.

The consensus mark for fourth-quarter 2024 revenues is pinned at $10.15 billion, indicating year-over-year growth of 14.95%.

For the fourth quarter of 2024, Netflix expects its earnings to be $4.23 per share.

The Zacks Consensus Estimate for fourth-quarter 2024 earnings is currently pegged at $4.2 per share, up 9.6% in the past 30 days and suggesting a year-over-year increase of 99.05%.

The Zacks Consensus Estimate for 2024 earnings is currently pegged at $19.78 per share, up 64.42% year over year and indicating an increase of 3.7% in the past 30 days.

NFLX’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, and missed in one, the average surprise being 5.73%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

For fiscal 2025, based on F/X rates as of Sept. 30, 2024, Netflix expects revenues of $43-$44 billion, indicating growth of 11-13% from 2024 revenue guidance of $38.9 billion, driven by an increase in paid subscribers and ARM.

Netflix expects a fiscal 2025 operating margin of 28% (also based on F/X rates as of Sept. 30, 2024) compared with a forecast for 27% in 2024 and ads revenues are expected to roughly double year over year in 2025.

Should Investors Jump Into Netflix Stock?

Netflix stock is not so cheap, as the Value Score of D suggests a stretched valuation at this moment.

In terms of the forward 12-month Price/Earnings (P/E) ratio, NFLX is trading at 34.4X, higher than the Zacks Consumer Discretionary sector’s 19.36X.

Netflix faces stiff competition from industry competitors, namely Fox FOXA, Roku ROKU and TEGNA TGNA.

While ROKU’s popularity is driven by the Roku Channel and Roku TV Program, FOXA rides on the growing viewership of Tubi, Fox News and Fox Business Network. TGNA’s long-term agreements with NBC, CBS and ABC are a concern for Netflix’s prospects.

However, NFLX’s expanding international content portfolio and clientele bodes well for the investors.

Netflix currently carries a Zacks Rank #2 (Buy), which implies that investors may want to jump into NFLX stock.

You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Zacks Investment Research

For Immediate Release

Chicago, IL – November 7, 2024 – Today, Zacks Equity Research discusses Netflix NFLX, Fox FOXA, Roku ROKU and TEGNA TGNA.

Industry: Broadcast Radio & TV

Link: https://www.zacks.com/commentary/2364964/4-broadcast-radio-tv-stocks-to-watch-from-a-challenging-industry

The Zacks Broadcast Radio and Television industry has been grappling with an escalation in cord-cutting despite a surge in demand for streaming content. However, industry players such as Netflix, Fox, Roku and TEGNA are reaping the benefits of a massive spike in digital content consumption. These companies are thriving due to their diverse content offerings, which include original, regional, and short-form content tailored for small screens like smartphones and tablets.

Improved Internet speed and penetration, coupled with technological advancements, have been advantageous for industry participants. As monetization and revenues from advertising spending continue to be modest, strategies focused on profit protection, cash management and greater technology integration have gained significance and are expected to aid these companies in driving top-line growth in the near term.

Industry Description

The Zacks Broadcast Radio and Television industry encompasses companies that provide entertainment, sports, news, non-fiction, and musical content across television, radio, and digital media platforms. These entities generate revenues through the sale of television and radio programs, advertising slots and subscriptions. With technological advancements and a growing demand for virtual reality and Internet radio, industry players are increasing their investments in research and development, as well as sales and marketing efforts, to remain competitive.

The industry's focus is likely to shift toward sustaining current levels of operations, coupled with a renewed emphasis on flexibility. This approach would accelerate the transition to a variable cost model, thereby reducing fixed costs and enhancing agility in the face of evolving market dynamics.

4 Broadcast Radio and Television Industry Trends to Watch

Shift in Consumer Preference a Key Catalyst: To adapt to the evolving landscape, companies are diversifying their content offerings for over-the-top (OTT) services alongside traditional linear TV. The availability of streaming services across a wide range of platforms has enabled them to reach a global audience, expand their international user base and attract advertisers to their platforms, thereby boosting ad revenues.

The utilization of services that aid advertisers in measuring their return on investment (ROI) and enhancing use cases is expected to benefit industry participants. Major leagues and events, such as the NFL, NHL, Olympics, European Games, EPL and elections, also contribute significantly to ad revenue generation.

Increased Digital Viewing Fuels Content Demand: Many industry participants, either launching their own OTT services or acquiring existing ones, leverage user insights to deliver tailored content. The surge in digital viewing has made consumer data readily available, allowing companies to apply artificial intelligence (AI) and machine learning techniques to create or procure targeted content. This approach not only boosts user engagement but also enables industry players to raise the prices of their services at opportune moments without the fear of losing subscribers.

Uncertain Macroeconomic Landscape Impedes Production and Ad Demand: Advertising is a significant revenue source for the Broadcast Radio and Television industry. However, industry participants are grappling with the effects of persistently high inflation, rising interest rates, increased capital costs, a soaring U.S. dollar and the looming threat of a recession. These factors have prompted advertisers to trim their ad budgets, which is expected to impact the top-line growth of industry players in the near term. Moreover, intense competition for ad dollars from tech and social media companies has been a significant impediment to the growth of industry participants.

Low-Priced Skinny Bundles Impact Revenues: The surge in cord-cutting has compelled industry participants to offer "skinny bundles." These Internet-based services often contain fewer channels than traditional subscriptions and are, therefore, more affordable. This move aligns with changing consumer viewing dynamics, as growth in Internet penetration and advancements in mobile, video and wireless technologies have boosted small-screen viewing. While these alternative services are expected to keep users engaged with their platforms, increasing the need for additional content, the low-priced skinny bundles are likely to dampen the top-line performance of industry players.

Zacks Industry Rank Indicates Dull Prospects

The Zacks Broadcast Radio and Television industry is housed within the broader Zacks Consumer Discretionary sector. It currently carries a Zacks Industry Rank #184, which places it in the bottom 27% of more than 250 Zacks industries.

The group's Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates dismal near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.

The industry's position in the bottom 50% of the Zacks-ranked industries results from a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are pessimistic about this group's earnings growth potential. Since Nov. 30, 2023, the industry's earnings estimates for 2024 have moved down 94.7%.

Despite the gloomy industry outlook, a few stocks are worth watching, as these have the potential to outperform the market based on a strong earnings outlook. But before we present such stocks, it is worth first looking at the industry's shareholder returns and current valuation.

Industry Beats Sector, S&P 500

The Zacks Broadcast Radio and Television industry has outperformed the broader Zacks Consumer Discretionary sector and the S&P 500 Index in the past year.

The industry has gained 42.4% over this period compared with the S&P 500's rise of 30.7% and the broader sector's increase of 14.9%.

Industry's Current Valuation

On the basis of trailing 12-month EV/EBITDA (Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization), which is a commonly used multiple for valuing Broadcast Radio and Television stocks, the industry is currently trading at 13.32X versus the S&P 500's 17.09X and the sector's 9.9X.

In the past five years, the industry has traded as high as 19.76X and as low as 9.3X, recording a median of 4.61X.

4 Broadcast Radio and Television Stocks to Watch

Netflix: This Zacks Rank #2 (Buy) company has been benefiting from its growing subscriber base thanks to a robust content portfolio and revenue initiatives like its crackdown on password-sharing and ad-supported tier. It has also hiked the prices of certain subscription plans. At the end of the third quarter, Netflix had 282.72 million paid subscribers across more than 190 countries globally, up 14.4% year over year. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Netflix's diversified content portfolio, backed by heavy investments in the production and distribution of localized, foreign-language content, has been driving its growth prospects. Netflix's sprawling games portfolio is also expected to boost user engagement in the near term.

Netflix now projects revenues to grow 15% year over year in 2024, at the high end of the company's prior expectation of 14-15% growth. For 2025, based on F/X rates as of Sept. 30, 2024, Netflix expects revenues of $43-$44 billion, indicating growth of 11-13% from 2024 revenue guidance of $38.9 billion. Netflix expects revenue growth to be driven by a healthy increase in paid memberships and ARM. Netflix is seeing significant growth in its advertising business, with ad revenues expected to roughly double year over year in 2025.

The Zacks Consensus Estimate for 2024 earnings has moved north by 3.7% to $19.78 per share in the past 30 days. NFLX's shares have returned 56.9% year to date.

Roku: This Zacks Rank #3 (Hold) company is benefiting from increased user engagement on The Roku Channel and the popularity of the Roku TV program. The Roku Channel remained the #3 app on Roku's platform in the third quarter in terms of reach and engagement, with streaming hours up nearly 80% year over year.

In the third quarter, the Roku operating system (OS) was again the #1 selling TV OS in the United States, with TV unit sales greater than the next two TV operating systems combined. The Roku OS was also the #1 selling TV OS in Mexico and Canada.

Streaming Households were 85.5 million, representing a net increase of 2 million from the second quarter of 2024. The Roku Home Screen, which is the beginning of viewers' streaming experience, reaches U.S. households with more than 120 million people every day, reflecting greater engagement and more monetization opportunities. The launch of third-party streaming channels, including Peacock, Disney+ and HBO Max, is aiding user growth. These services have done well on the Roku platform owing to its large base of engaged users and promotional capabilities.

The Zacks Consensus Estimate for ROKU's 2024 loss has narrowed by 34 cents to $1.10 per share in the past 30 days. The stock has lost 24% year to date.

Fox: The company is riding on the growing demand for live programming. The robust adoption of Fox News and Fox Business Network is expected to drive the user base in the near term. The company is benefiting from the launch of Tubi in the United Kingdom, which has a vast library of more than 20,000 movies and TV episodes on demand.

This Zacks Rank #3 company generates a significant portion of advertising revenues from live programming, which is relatively immune to the rapidly intensifying competition from subscription-based video-on-demand services. The company has expanded its partnership with The Trade Desk to bring best-in-class innovation to advertisers to help them reach their audiences and measure campaign performance to meet their business objectives. Moreover, recovering ad spending in the local advertising market is a major positive for Fox. Also, increasing affiliate-fee revenues are expected to drive Fox's top line.

The Zacks Consensus Estimate for Fox's fiscal 2025 earnings has moved north by a penny to $3.70 per share in the past 30 days. The stock is up 46.9% year to date.

TEGNA: It has evolved as one of the largest U.S. broadcasting groups and a leading local news and media content provider, thanks to a plethora of acquisitions. TEGNA's portfolio of NBC, CBS, ABC and FOX stations operate under long-term affiliation agreements. The television stations sell available commercial advertising spots as well as produce local programming, such as news, sports, and entertainment. TEGNA carries a Zacks Rank #3 currently.

TEGNA's focus on content creation rather than TV broadcasting lowers the risk of the cord-cutting threat that is affecting the U.S. Pay-TV industry. Live event programming, which remains the most-watched content for viewers, can be sold either to TV channels, websites or streaming services. Additionally, the company has been investing in digital initiatives and streaming services, potentially opening up new revenue streams.

The Zacks Consensus Estimate for 2024 earnings has remained steady at $3.07 per share in the past 30 days. TGNA's shares have gained 5% year to date.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Zacks Investment Research

The Zacks Broadcast Radio and Television industry has been grappling with an escalation in cord-cutting despite a surge in demand for streaming content. However, industry players such as Netflix NFLX, Fox FOXA, Roku ROKU and TEGNA TGNA are reaping the benefits of a massive spike in digital content consumption. These companies are thriving due to their diverse content offerings, which include original, regional, and short-form content tailored for small screens like smartphones and tablets. Improved Internet speed and penetration, coupled with technological advancements, have been advantageous for industry participants. As monetization and revenues from advertising spending continue to be modest, strategies focused on profit protection, cash management and greater technology integration have gained significance and are expected to aid these companies in driving top-line growth in the near term.

Industry Description

The Zacks Broadcast Radio and Television industry encompasses companies that provide entertainment, sports, news, non-fiction, and musical content across television, radio, and digital media platforms. These entities generate revenues through the sale of television and radio programs, advertising slots and subscriptions. With technological advancements and a growing demand for virtual reality and Internet radio, industry players are increasing their investments in research and development, as well as sales and marketing efforts, to remain competitive. The industry's focus is likely to shift toward sustaining current levels of operations, coupled with a renewed emphasis on flexibility. This approach would accelerate the transition to a variable cost model, thereby reducing fixed costs and enhancing agility in the face of evolving market dynamics.

4 Broadcast Radio and Television Industry Trends to Watch

Shift in Consumer Preference a Key Catalyst: To adapt to the evolving landscape, companies are diversifying their content offerings for over-the-top (OTT) services alongside traditional linear TV. The availability of streaming services across a wide range of platforms has enabled them to reach a global audience, expand their international user base and attract advertisers to their platforms, thereby boosting ad revenues. The utilization of services that aid advertisers in measuring their return on investment (ROI) and enhancing use cases is expected to benefit industry participants. Major leagues and events, such as the NFL, NHL, Olympics, European Games, EPL and elections, also contribute significantly to ad revenue generation.

Increased Digital Viewing Fuels Content Demand: Many industry participants, either launching their own OTT services or acquiring existing ones, leverage user insights to deliver tailored content. The surge in digital viewing has made consumer data readily available, allowing companies to apply artificial intelligence (AI) and machine learning techniques to create or procure targeted content. This approach not only boosts user engagement but also enables industry players to raise the prices of their services at opportune moments without the fear of losing subscribers.

Uncertain Macroeconomic Landscape Impedes Production and Ad Demand: Advertising is a significant revenue source for the Broadcast Radio and Television industry. However, industry participants are grappling with the effects of persistently high inflation, rising interest rates, increased capital costs, a soaring U.S. dollar and the looming threat of a recession. These factors have prompted advertisers to trim their ad budgets, which is expected to impact the top-line growth of industry players in the near term. Moreover, intense competition for ad dollars from tech and social media companies has been a significant impediment to the growth of industry participants.

Low-Priced Skinny Bundles Impact Revenues: The surge in cord-cutting has compelled industry participants to offer "skinny bundles." These Internet-based services often contain fewer channels than traditional subscriptions and are, therefore, more affordable. This move aligns with changing consumer viewing dynamics, as growth in Internet penetration and advancements in mobile, video and wireless technologies have boosted small-screen viewing. While these alternative services are expected to keep users engaged with their platforms, increasing the need for additional content, the low-priced skinny bundles are likely to dampen the top-line performance of industry players.

Zacks Industry Rank Indicates Dull Prospects

The Zacks Broadcast Radio and Television industry is housed within the broader Zacks Consumer Discretionary sector. It currently carries a Zacks Industry Rank #184, which places it in the bottom 27% of more than 250 Zacks industries.

The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates dismal near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.

The industry’s position in the bottom 50% of the Zacks-ranked industries results from a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are pessimistic about this group’s earnings growth potential. Since Nov. 30, 2023, the industry’s earnings estimates for 2024 have moved down 94.7%.

Despite the gloomy industry outlook, a few stocks are worth watching, as these have the potential to outperform the market based on a strong earnings outlook. But before we present such stocks, it is worth first looking at the industry’s shareholder returns and current valuation.

Industry Beats Sector, S&P 500

The Zacks Broadcast Radio and Television industry has outperformed the broader Zacks Consumer Discretionary sector and the S&P 500 Index in the past year.

The industry has gained 42.4% over this period compared with the S&P 500’s rise of 30.7% and the broader sector’s increase of 14.9%.

One-Year Price Performance

Industry's Current Valuation

On the basis of trailing 12-month EV/EBITDA (Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization), which is a commonly used multiple for valuing Broadcast Radio and Television stocks, the industry is currently trading at 13.32X versus the S&P 500’s 17.09X and the sector’s 9.9X.

In the past five years, the industry has traded as high as 19.76X and as low as 9.3X, recording a median of 4.61X, as the chart below shows.

EV/EBITDA Ratio (TTM)

4 Broadcast Radio and Television Stocks to Watch

Netflix: This Zacks Rank #2 (Buy) company has been benefiting from its growing subscriber base thanks to a robust content portfolio and revenue initiatives like its crackdown on password-sharing and ad-supported tier. It has also hiked the prices of certain subscription plans. At the end of the third quarter, Netflix had 282.72 million paid subscribers across more than 190 countries globally, up 14.4% year over year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Netflix’s diversified content portfolio, backed by heavy investments in the production and distribution of localized, foreign-language content, has been driving its growth prospects. Netflix’s sprawling games portfolio is also expected to boost user engagement in the near term.

Netflix now projects revenues to grow 15% year over year in 2024, at the high end of the company’s prior expectation of 14-15% growth. For 2025, based on F/X rates as of Sept. 30, 2024, Netflix expects revenues of $43-$44 billion, indicating growth of 11-13% from 2024 revenue guidance of $38.9 billion. Netflix expects revenue growth to be driven by a healthy increase in paid memberships and ARM. Netflix is seeing significant growth in its advertising business, with ad revenues expected to roughly double year over year in 2025.

The Zacks Consensus Estimate for 2024 earnings has moved north by 3.7% to $19.78 per share in the past 30 days. NFLX’s shares have returned 56.9% year to date.

Price and Consensus: NFLX

Roku (ROKU) is one of the stocks most watched by Zacks.com visitors lately. So, it might be a good idea to review some of the factors that might affect the near-term performance of the stock.

Over the past month, shares of this video streaming company have returned -13.4%, compared to the Zacks S&P 500 composite's +0.4% change. During this period, the Zacks Broadcast Radio and Television industry, which Roku falls in, has gained 5.6%. The key question now is: What could be the stock's future direction?

Although media reports or rumors about a significant change in a company's business prospects usually cause its stock to trend and lead to an immediate price change, there are always certain fundamental factors that ultimately drive the buy-and-hold decision.

Revisions to Earnings Estimates

Rather than focusing on anything else, we at Zacks prioritize evaluating the change in a company's earnings projection. This is because we believe the fair value for its stock is determined by the present value of its future stream of earnings.

We essentially look at how sell-side analysts covering the stock are revising their earnings estimates to reflect the impact of the latest business trends. And if earnings estimates go up for a company, the fair value for its stock goes up. A higher fair value than the current market price drives investors' interest in buying the stock, leading to its price moving higher. This is why empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.

For the current quarter, Roku is expected to post a loss of $0.46 per share, indicating a change of +16.4% from the year-ago quarter. The Zacks Consensus Estimate has changed +7.5% over the last 30 days.

The consensus earnings estimate of -$1.14 for the current fiscal year indicates a year-over-year change of +77.3%. This estimate has changed +20.6% over the last 30 days.

For the next fiscal year, the consensus earnings estimate of -$0.99 indicates a change of +13% from what Roku is expected to report a year ago. Over the past month, the estimate has changed -13.2%.

Having a strong externally audited track record, our proprietary stock rating tool, the Zacks Rank, offers a more conclusive picture of a stock's price direction in the near term, since it effectively harnesses the power of earnings estimate revisions. Due to the size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, Roku is rated Zacks Rank #2 (Buy).

The chart below shows the evolution of the company's forward 12-month consensus EPS estimate:

12 Month EPS

Projected Revenue Growth

While earnings growth is arguably the most superior indicator of a company's financial health, nothing happens as such if a business isn't able to grow its revenues. After all, it's nearly impossible for a company to increase its earnings for an extended period without increasing its revenues. So, it's important to know a company's potential revenue growth.

In the case of Roku, the consensus sales estimate of $1.14 billion for the current quarter points to a year-over-year change of +16%. The $4.05 billion and $4.61 billion estimates for the current and next fiscal years indicate changes of +16.3% and +13.6%, respectively.

Last Reported Results and Surprise History

Roku reported revenues of $1.06 billion in the last reported quarter, representing a year-over-year change of +16.5%. EPS of -$0.06 for the same period compares with -$2.33 a year ago.

Compared to the Zacks Consensus Estimate of $1.02 billion, the reported revenues represent a surprise of +4.37%. The EPS surprise was +82.86%.

The company beat consensus EPS estimates in each of the trailing four quarters. The company topped consensus revenue estimates each time over this period.

Valuation

No investment decision can be efficient without considering a stock's valuation. Whether a stock's current price rightly reflects the intrinsic value of the underlying business and the company's growth prospects is an essential determinant of its future price performance.

Comparing the current value of a company's valuation multiples, such as its price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF), to its own historical values helps ascertain whether its stock is fairly valued, overvalued, or undervalued, whereas comparing the company relative to its peers on these parameters gives a good sense of how reasonable its stock price is.

The Zacks Value Style Score (part of the Zacks Style Scores system), which pays close attention to both traditional and unconventional valuation metrics to grade stocks from A to F (an An is better than a B; a B is better than a C; and so on), is pretty helpful in identifying whether a stock is overvalued, rightly valued, or temporarily undervalued.

Roku is graded F on this front, indicating that it is trading at a premium to its peers. Click here to see the values of some of the valuation metrics that have driven this grade.

Conclusion

The facts discussed here and much other information on Zacks.com might help determine whether or not it's worthwhile paying attention to the market buzz about Roku. However, its Zacks Rank #2 does suggest that it may outperform the broader market in the near term.

Zacks Investment Research