Combining Growth & Value: ROKU Revisited
I believe ROKU has been discussed here, but I haven’t searched for the threads. I’ve been adding to existing positions but ROKU is my only recent new purchase, so I thought I’d provide a mini-update for anyone possibly interested. Feel free to skip this if the idea isn’t appealing to you. This is my first quick look and I have not studied in depth at all, as a local project seems to be taking most of my time.
Its short history makes ROKU a bit of an unknown when it comes to future expectations, but let’s take a quick look at some numbers
Year Sales Growth 2015 320 100.0% 2016 399 24.7% 2017 513 28.6%
2018 quarterlies look like this:
Period Q1-18 Q2-18 Q3-18 Sales 137 157 173 Increase 14.6% 10.2%
So sales are increasing annually at the rate of 25-30% and climbing. Positive, but no screaming “gotta have it” numbers so far.
Net income for the first 3 years has been negative, as expected, and negatively increasing. -41,-45,-64. However, the last 4 quarters are bouncing around the zero mark: +7, -7, +1, -10. So with a good Q4, ROKU should be able to show a positive net income, or close to it.
Things I like:
• The buzz: Everyone I’ve talked to who’s tried ROKU swears by its combination of excellent features, user interface and low cost.
• Ability to include geographically local channels.
• Low cost in comparison to other streamers.
• The chart: http://schrts.co/kwpN1v ROKU has been hammered hard, maybe too hard.
Things I question:
• ROKU has substantial accounts receivable. I haven’t looked into the “why” but see little reason off hand for any sizeable receivables with a streaming subscription model. Needs study.
• Competition in streaming is plentiful. While I think ROKU is steadily making its name in the field, the speed of change is likely to increase steadily. Other than Netflix and Prime, I don’t think the winners are stable even in the short term, let alone 5-10 years out.
I’ve taken a mid-size starting position (5%) but haven’t had time for in-depth study. So when time becomes available, there are many steps left for me to take: Listening to conference calls, studying their website, and subscribing to their service to see the value for myself, plus studying the financials in more detail. For now, I’m satisfied to hold a small piece of ROKU and expect it to retrace much of its recent price drop. Your mileage may vary.
By mid 2020, ROKU will likely be a full-size entry in my focused ports, or forever history.
Best to all,