Hey Traders,
Reader PEJ requested a hard look at Roku Inc. (Ticker: ROKU) for this week’s Pit Report Stock of the Week.
Let’s dive in.
Roku has had a ride …
It was over $450 in July of 2021.
It now sits at $55.36.
That is a 90% haircut, folks.
But is it deserved? Is Roku going to zero … or is this a chance to go long?
Here are your answers …
The Good:
One of the things working for ROKU is that people recognize the brand. While not everyone knows exactly what they do, everyone knows them unlike, say, Fubotv Inc (Ticker: FUBO).
That is part of the reason for the valuation, which despite the selling, stands at over $7.5 billion.
After bottoming at under $40 a share, the stock has had a nice rebound, showing that at this point there may be some interest.
The streamer is finally starting to break into its own content with partnerships with the NFL Network and some of its own original content on the ROKU channel.
It is a great box for people who do not want to upgrade TVs or people who want a box that will update the TV for them when new channels are added.
Another big feature is that ROKU will find you free stuff. That’s something people tend to like!
One of the ways they have done this is by adding sound systems to their offerings. An amazing sound system is something that Samsung and Sony cannot offer in the smart TV itself and people really do love one-stop shopping.
In the end, ROKU is nice for a lot of people, but does it do a lot more than smart TVs can do now?
Not without expanding their free TV network and adding content.
The Bad:
The company is not making money. They lost a lot of money in the last 3 quarters and competition is only increasing.
Smart TV’s are really the issue ROKU has. It is in a race to continue to be ahead of the TV’s themselves, to be a better purveyor of content than a Samsung TV.
The question a ROKU buyer asks themselves is, “Do I buy a ROKU or do I go to a Sonos and deal with a smart TV.
For many users, the answer is the latter.
The technology is actually cool, but I think the end game for ROKU is a buyout by Samsung, Netflix, Disney or maybe their biggest threat – Amazon.
Amazon Fire is essentially a Roku, but with all the shopping built in.
No, they won’t offer you sweet sound … but you can buy it fast.
ROKU is seeing wider losses per quarter because demand is evaporating as the TV space changes.
Best bet here is the stock going to the teens before the IP becomes worth so much that someone buys it.
That said, near-term while the market runs hot we could see the stock move higher.
This is a big stay -way for investors and a fun stock to trade for day traders.
If I was thinking about buying, I would look at the earnings trend and stop.
This is a doomed company with a lot of valuable IP.
Someday it will be owned by someone else.
Your Only Option,
Mark Sebastian