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Roku Is Up 240%... How Far Can it Go?

Written by Monica Savaglia
Posted July 23, 2019

In September 2017, smart TV provider and popular streaming platform company Roku went public.

The company’s first day of trading was everything it hoped it would be — its IPO was a success! The tech company’s shares jumped up 67% on the first day of trading and closed out the day with shares at $23.50 after opening the market at $15.78. This was just the beginning of Roku’s success. 

It’s almost been two years since this Los Gatos, California-based company had its IPO, and it continues to make a name for itself in the streaming market. Not to mention it’s received the attention of many investors and analysts. And that’s because the race to dominate the streaming world continues to get more competitive.

Some of the biggest names on the market have been leaping into the streaming world in hopes of dominating a market with massive potential. You know Netflix is one of those big players, but it’s been around for a while and kind of defined the streaming world. Then there are companies like Amazon and Disney, which have been ramping up their efforts to dominate streaming. Disney, Netflix, and Amazon are spending billions of dollars to acquire content rights and create direct-to-consumer video platforms — all things costly.

Roku owns no content and is growing faster than Disney, Netflix, and Amazon because Roku instead acts as an operating system for streaming. It has created a marketplace that provides one single location to access services like Netflix, Hulu, and HBO. Users have easy access to all the other subscriptions they have.

In addition to that, the company sells smart TVs with its streaming platform. At a recent earnings call, Roku’s CEO Anthony Wood said that one in every three smart TVs sold in the U.S. last quarter came from Roku. Roku has set itself apart from the competition with these two things. 

Since the beginning of this year, Roku has been up by more than 240%. That's partially because the company has positioned itself in a way where if a different company launches a new streaming platform, that platform will be available on Roku, which will keep a portion of the revenue when a subscriber signs up for a streaming service on Roku. 

Mark Mahaney, a managing director and analyst at RBC Capital Markets, said:

Roku is trying to be the Switzerland of streaming, the operating system that everybody uses to get the large platforms. The role of a Switzerland is a lot more valuable in a world where there are multiple super powers rather than just one.

That’s exactly it. Roku is benefiting from these giant companies that are creating their own streaming platforms. In the upcoming months, Disney Plus, Apple TV Plus, and AT&T’s HBO Max will be rolling out, which is good news for Roku.

Roku Poised for Growth

In addition to the revenue that’s coming in from its platform and smart TVs, Roku offers its own ad-supported streaming option called the Roku Channel.

BusinessWire reported at the end of June that Roku’s streaming TV platform accounted for more than 30% of U.S. sales of connected TV devices in the first quarter of 2019. Roku now has a 36% lead over the next major platform, Sony PlayStation. This report suggests that this will stretch to 70% by the end of the year. 

Alicia Reese, senior associate, equity research at Wedbush Securities, had this to say about Roku’s strategy: 

They do have full control over when they reach profitability and right now they’re very consciously reinvesting in the business to grow internationally. If they can increase the money they get from each account, that’s a great sign.

Roku lost $9.7 million in first quarter of 2019, which is up from $6.6 million in the same quarter last year. The company is gaining control of its profitability and expanding globally, all clear signs that it understands its strengths and weaknesses.

Roku isn’t focusing on putting money into its own content like most of the other streaming companies, and at the moment it has no plans to. It wouldn't make logical sense. Reese also said: “Roku doesn’t need to own the content, as long as it has relatively inexpensive but compelling enough content for the Roku Channel it can continue to keep eyeballs on its platform.”

It’s focused on growing in the U.S. and across the globe, and its growth is right on track to dominate the streaming world. A recent report from Strategy Analytics, a provider of industry data and research, found that there are now as many as 41 million Roku devices in use. That represents a 15.2% chunk of all streaming devices in the U.S. 

Now imagine if you knew about Roku around the time it went public. Roku had an IPO price of $14 per share. As of Monday, July 22, shares opened up at $107.13. That’s a 665% increase since the company first started trading.

That’s why it’s valuable to get an in-depth look into upcoming IPOs and companies that have filed a prospectus. Two years ago, I saw the profit and market potential of Roku, and it’s still soaring. The company has focus and growth on its mind, and it’s operating in one of the most lucrative markets around today.

Finding out first about companies like Roku isn’t an opportunity that comes around often. However, it’s not impossible if you have access to the right resources.

If you’re interested in educating yourself on similar IPOs and companies with this type of growth potential, click here.

Until next time,

Monica Savaglia Signature Park Avenue Digest

Monica Savaglia
Editorial Director, Park Avenue Digest

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