Roku, Next Big Tech Flop Or Opportunity?

Tech stocks are partying like it's 1999, the Nasdaq is up nearly 30% this year, billion-dollar startups are attracting capital at the greatest rate since the dot-com crash and it’s been the busiest year globally for new stock listings since 2007, with 1,450 companies listing shares (mostly in Asia). Amidst this booming market, several high-profile companies have opted to go public, some like Snap and Blue Apron were enormous flops but the average new listing in the U.S is up 32%. One company that has been especially volatile since its IPO has been Roku.

Roku was one of the first companies involved in the now booming streaming business, and is mostly known for selling small plugin boxes allowing people to stream web content like Netflix and Hulu directly on their T.V. When it went public on September 28th, Roku stock surged 68% to $23.50 a share making it the best performing new listing of the year. Unfortunately, the party did not last long, over the course of the next 5 weeks Roku stock was pummeled on concerns that it would not be able to compete with the likes of Amazon and Apple who had entered the hardware streaming business. Shares hit an all-time low of just above $18, leading up to the company’s 1st earnings report on November 8th. However, Roku’s fortunes changed again as soon as it announced its 3rd quarter earnings which showed how the hardware maker was diversifying. Shares surged over 100% in three days to an all-time high of $48.80. Since then the stock cooled off somewhat but remains volatile. Question is, does Roku deserve a place in your portfolio or is it just another overpriced and overhyped tech stock.

(Click on image to enlarge)

Roku Stock since it went public on September 28th to December 4th. Shares surged over 100% post-earnings.

Roku has long been an industry leader when it came to selling internet T.V gadgets, the rise of internet streaming and popularity of services like Netflix made Roku a player in an exciting and growing new field. The problem is the rise of internet T.V has attracted some large players. Roku, a company with a current valuation of just over $3 billion, must compete with the likes of Apple worth almost $900 billion and its Apple T.V as well as Amazon and its Fire Stick, not to mention competition from gaming consoles like Microsoft’s Xbox and Sony’s Play station, which also gives people the ability to stream internet content on their T. V’s. Investors and analysts have long been concerned that Roku would not be able to compete against these tech giants.

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Disclaimer: This material has been distributed for informational purposes only and is the opinion of the author, it should not be considered as investment advice.

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Ebs 2 years ago Member's comment

Roku seems to be the future. Would it be possible you expand more upon this topic in another article of yours. This was very informative.

Ayelet Wolf 2 years ago Member's comment

Why is #Roku any better than #Google's Chromecast or #Amazon Fire TV Stick? I've never used Roku but the I have the other two. The Fire TV Stick was far superior in my opinion, with it's dedicated voice remote. Especially if you are deeply integrated into the Amazon Echo system.

But more recently Google seems to be winning out by having it's technology already integrated into far more TV sets. Why do you think Roku will win out in the end?


Duanne Johnson 2 years ago Member's comment

They all have voice abilities now:

But yes, I never liked how the chrome stick did not come with a remote.

Charles Howard 2 years ago Member's comment

What about #Apple? I thought the Apple TV was still a popular choice. $AAPL

Ayelet Wolf 2 years ago Member's comment

The reason I didn't include Apple is because the others all have very affordable stick options. Apple is another price range. And unlike Android, they won't become pre-integrated into any TVs.

Danny Straus 2 years ago Member's comment

While I don't know much about it myself, I've read that much of Amazon TV Stick's success was fueled by the ability to easily add the Kodi app to easily (and illegally) stream virtually any tv show or movie. I wonder if Roku has this same ability and if not, if their corporate citizenship is hurting them. $ROKU $AMZN

Michael Molman 2 years ago Author's comment

I actually bought a couple of firesticks for the sole purpose of Kodi. However it stopped working very well after a year, so I no longer think it is much of a factor.

Duke Peters 2 years ago Member's comment

Kodi still works but you have to side load-it now.