Will Roku Stock Double Again in 2021?
July 06 2021 - 6:41AM
Finscreener.org
Shares of Roku (NASDAQ: ROKU) went
public back in September 2017 at a price of $14. It is currently
trading at $429 which means the stock has generated annual returns
of almost 150% on average. Roku stock is up close to 35% in the
first half of 2021 and is one of the top growth stocks in the
technology sector.
Roku - an overview
Roku operates a TV streaming platform. The company has two
primary business 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,
2020, the company had 51.2 million active accounts.
It provides digital and video advertising, content distribution,
subscription, and billing services, as well as other transactions,
brand sponsorship, and promotions, and audience development
campaigns. Roku also manufactures, sells, and licenses smart TVs
under the Roku TV name.
Roku has managed to increase its
sales from $512 million in 2017 to $1.78 billion in 2020.
Analysts tracking the stock expect Roku to increase sales by 55%
year over year to $2.76 billion in 2021 and by 38% to $3.81 billion
in 2022. While Roku ended 2020 with a net loss, Wall Street expects
the company to post an adjusted profit of $0.46 per share in 2021.
Its EPS is forecast to improve to more than double to $1.12 per
share in 2022.
Key growth drivers for Roku
The digital ad segment in the streaming space is forecast to
rise from $8 billion in 2020 to $18 billion by 2024 in the U.S.
Roku aims to gain traction in this rapidly expanding market. In Q1
of 2021, the number of streaming ad impressions tripled year over
year driving platform revenue sales by 101%, compared to the
year-ago quarter. The company has also invested in the Roku channel
which is a streaming service that primarily acts as a content
aggregator while offering proprietary content as well.
The Roku Channel has experienced massive growth in the last four
quarters as subscriptions to third-party party services more than
doubled in Q1. Roku’s shareholder letter confirmed the Roku Channel
has 70 million subscribers at the end of Q1, up from 63 million in
Q4 of 2020.
The company’s management is optimistic about the explosive
growth in this vertical and considers the Roku Channel as a
flywheel driven by easy access to content and increasing advertiser
spending.
Roku explained, “This flywheel is enabling us to be more
creative and expansive in sourcing content suited to an AVOD
(advertising video on demand) business model.” It added, “We expect
that our content investment will continue to be commensurate with
the scale and growth trajectory of The Roku Channel.”
What next for investors?
Roku will continue to benefit from the accelerated shift towards
online streaming. It is expected to spend over $1 billion on
content in the next year. Compared to Netflix’s content expenditure
of $17 billion, it might seem minuscule however Roku is also a very
smaller player compared to the streaming giant.
Roku is successfully monetizing its user base and generated more
than $32 per user in the last four quarters. In the first quarter
of 2021, the company increased sales by 79% year over year while
active accounts were up 35%. Roku has also reported positive cash
flows, net earnings, and robust liquidity in the last
12-months.
Roku is one of the top growth stocks and part of a market
expanding at an enviable rate.
Roku (NASDAQ:ROKU)
Historical Stock Chart
From Mar 2024 to Apr 2024
Roku (NASDAQ:ROKU)
Historical Stock Chart
From Apr 2023 to Apr 2024