Even after a move from 40 to 160 this year alone, why do I remain bullish?
Company Profile: Roku, Inc. operates a TV streaming platform. The company operates in two segments, Platform and Player. Its platform allows users to discover and access various movies and TV episodes, as well as live sports, music, news, and others. As of December 31, 2018, the company had 27.1 million active accounts. It also provides advertising products, including videos ads, brand sponsorships, and audience marketplace program; and manufactures, sells, and licenses TVs under the Roku TV name. In addition, the company offers streaming media players and accessories under the Roku brand name; and sells branded channel buttons on remote controls. It provides its products and services through retailers and distributors, as well as directly to customers through its Website in the United States, Canada, the United Kingdom, France, the Republic of Ireland, Mexico, and various Latin American countries. The company was founded in 2002 and is headquartered in Los Gatos, California.
Why Continue To be Bullish?
- ) Service Revenue Business -Revenue was up 59% year-over-year to $250 million. But $167.7 million of that was “platform revenue,” ads and other services delivered to existing Roku owners. The margins on that business are 65%, against just 5% from selling players.
Roku’s platform revenue now comprises over 65% of the company’s total revenue. At the same time, active accounts grew to 30.5 million, up 39% from the prior-year quarter, while streaming hours of 9.4 billion grew by 72%.
2.) ROKU is beating Amazon- Roku has created a gigantic market share in a scaled market, a market that looks set to dominate TV in the next decade. Consumers now trust Roku more than Amazon. It now has 43% of the connected TV market against just 18% for Amazon. TVs, in turn, represent 55% of streaming hours.
3.) Roku and Walmart
4.) Roku is an “arms dealer” in the streaming video space, as its hardware facilitates multiple streaming platforms, Roku is therefore able to present a highly targeted proposition to advertisers, as each new Roku user is assigned a unique device ID and all content viewed can be extracted for superior targeting,
5.) Connected in Several TVs
While many manufacturers took the easy path, using a modified mobile operating system (OS) to power their connected TVs, the Roku OS was built from the ground up, specifically designed for the task. As a result, the company has a growing list of manufacturers that license the system to include it in their connected TVs, rather than spending precious resources to develop their own. This partner list includes TCL, Sharp, Philips, RCA, JVC, Hitachi, and more. As a result of these deals, Roku’s OS can now be found in more than one in three connected TVs sold in the United States.
6.) Roku is Platform Agnostic
Roku’s streaming platform will support the growing list of Netflix rivals, including Walt Disney Co. Streaming platforms pay Roku a royalty for each subscriber that Roku adds to their service, the analyst said. In addition, streaming platforms spend marketing dollars on Roku to raise awareness, which makes the case that it is may be “impossible (our word) to launch a new OTT service without access to Roku’s 36% of connected TV homes.
6.)
Roku’s new soundbar gives users premium sound quality, Bluetooth connectivity to listen to music from other devices, a voice-enabled remote to control the soundbar and TV, and a built-in Roku streaming player. This new soundbar is $179.99.
With its new smart soundbar, Roku is likely less interested in making money on the device and more interested in making sure its streaming-TV platform is in yet another location of convenience, giving consumers another way to easily start using Roku’s streaming-TV operating system. Roku can make money on the speaker later by monetizing these users from earning revenue from subscriptions and ads served through the platform.
Key Points:
Even after 580% rise from the start of Oct 2017, this is a great business but not a great value.
Stocks with good growth narratives are marching higher. It’s that simple. With rates so low, investors are seemingly turning a blind eye to valuation and focusing exclusively on long term growth potential.
That said. Roku on lower levels will remain bought on pullbacks.
Supports found 130/110
$13B marketcap
Read more through several ROKU articles through Motley Fool
