Friday File: Quarterly Pressure on Small(er) Tech, plus a few buys and speculations

Roku, Fastly, Markel, Kambi, Boston Omaha and more are covered in my Latest thoughts (and buys and sells) from the Real Money Portfolio

By Travis Johnson, Stock Gumshoe, August 5, 2021

I’m celebrating my birthday tomorrow, so this Friday File comes to you a bit early — call it a Thursday File, I guess. That means I won’t be catching any interesting news that might come out of this evening’s conference calls, as earnings season continues to progress, but I’ll catch up with those next week… and in the meantime, we’ve got plenty to talk about.

This has generally been a quarter of high expectations, and in a few cases that ran into harsh reality this week — particularly with some of the more richly-valued tech stocks in my portfolio like Fastly and Roku, so let’s start with those fellas, they just reported last night.

Roku (ROKU) had another pretty fantastic quarter in all the ways that matter to me — Roku grew TV viewing hours on its platform by 19%, which helped to drive the number of ads served dramatically and get those bigger commitments from all the major advertisers for “up front” ad buys in the next TV season (though “seasons” don’t really mean so much any more). Platform revenues, which includes both commissions for streaming service sales and advertising on ad-supported streaming channels, continue to be the massive, double-leverage driver of the business, with growth of 117% over last year. The average revenue per user (ARPU) is now $36.46 for the past year — and that’s where the double leverage really shows up, the increase in accounts and the increase in revenue per user feed on each other. A year ago there were 43 million active accounts, with an ARPU of $24.92… now there are 55 million accounts driving 17.4 billion streaming hours (down from Q1’s 18.3, FYI, one of the negatives that analysts were worried about), and the ARPU is $36.46. That’s where the platform revenue growth of 117% came from this quarter, from $244 million a year ago to $532 million.

Their costs are rising, both with hardware expenses and with some incremental investments in content, and it remains a concern with some investors that they might get a little too content-happy and throw money at building new shows, but so far that doesn’t seem to be a worrisome trend — they’re buying small exclusive content brands and not pushing too much money that way so far.

Their results fell a little bit short of analyst expectations, though, and some ...

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