|By Nathan Young|
Streaming devices continue to grow in popularity as people look to cut the cord and find less expensive alternatives. Roku offers products that all people to stream Netflix, YouTube, and other channels millions use on a daily basis. Over the last month, the stock has soared, matching or beating many price targets set by investment banks.
The reason for a growth in the streaming industry has two main points. The first being that cable costs are too high and people are no longer willing to pay. Streaming offers less expensive options and Roku is able to capitalize on this transition. Secondly, the lack of contracts with streaming gives people the freedom to enter and exit services as they see fit. Contracts at this point have a negative tone because people don’t want to be locked into a service they may not enjoy.
One of the well known names, Laura Martin of Needham raised the target price to $50, indicating people expect the stock to continue growing. From end of year 2015 to end of year 2016, the company’s sales increased from $319.85M to $398.64M, indicating momentum heading forward. Despite the growth in sales, EBITDA worsened over the same period from negative $34.99M to negative $38.05M. Quarterly numbers appears to be well, but the company is new to the public market and it may take some time to see how this stock plays out.
With a company doing so well, you have to take into account the risks that could slow or even negate the growth. First would be shift away from streaming. Streaming is fairly new to the world and it is difficult to see it fade away so soon. However, you must be aware. Secondly, competition is fierce in this industry. Competitors include Google with the Chromcast and Amazon with the Fire Stick. These are big names, but if Roku can maintain their momentum, they should be well going forward.
As the holiday season ramps up, keep an eye on the Roku sales numbers. For those who are interested, it may be beneficial to wait for the year-end numbers to get a solid indication of how the company is doing. Retail seems to be getting off to a strong start this season and that could be a good sign for Roku.
Right now, Roku seems to have room to go higher, but with any stock that is increasing rapidly, be sure not to chase the stock. Patience is key and waiting for a pull back could be worth it. However, if you are playing the long term game then waiting for a better entry point may not be all that important. Roku is in a growing market and should prove to benefit investors.
Conversion by Hastings Jeff 1 of 1000 shares of Roku
|Roku insider trading alert for conversion of class b common stock by Hastings Jeff 1, the corporate stakeholder, on January 9, 2019. This event was filed by Roku Inc with SEC on 2019-01-09. Statement of changes in beneficial ownership - SEC Form 4 [view details]|
|Nathan Young is a Senior Member of Macroaxs Editorial Board - US Equity Analysis. With years of experience in the financial sector, Nathan brings a diverse base of knowledge. Specifically, he has in-depth understanding of application of technical and fundamental analysis across different equity instruments. Utilizing SEC filings and technical indicators, Nathan provides a reputable analysis of companies trading in the United States. View Profile|
|This media report from Macroaxis distributed on November 28, 2017 was a factor to the next trading day price decrease.The trading delta at closing time against the next closing price was 3.36% . The trading delta at closing time when the story was published against the current closing price is 13.78% .|
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