People worry that ad revenue will dry down with the virus crisis… I don’t argue against the fact that marketing and advertisement budgets will come under pressure… the question is which portion of the ad $ slice will get cut… i think the answer is clear, with all the sports and live events cancelled, a large portion there is already gone from the market.
My bet is that with increased TV hours due to lock down, increased food and supplies business and increased consumption of low cost / free TV will actually increase ad $ allocation to platforms like ROKU… not to mention ability to measure Roi on ROKU as the author of that article suggests.
Yes, this is my conjecture, do your own diligence…
Ofcourse ROKU has been delivering excellent results quarter after quarter growing at ~50% at a $1B+ run rate now… helps a little bit to build confidence!
Yes, over last couple of weeks, I have been adding a little more to my already large position in ROKU… as I have been to CRWD as well which just announced bloc buster quarter and strong guidance. While I digress, CRWD is also very attractive valuation even with today’s bump up.
The problem is that overall ad spending is decreasing. There is simply no evidence that ROKU will be immune from this hit. If Roku shows slower growth or even negative growth for a quarter, what happens to the stock price?
Time users spent on CBS’s Pluto TV increased by 75% from March 1 to March 7,
Mobile usage in China has grown by 30% since January and is up in many countries due to the pandemic.
—————-
Therefore, isn’t it possible that ROKU may just see a “pop” rather than take a “hit” due to Covig-19?
Simply a question. I’m not really concerned with this short term view. My thesis is based on global expansion which just started last quarter rather than wether or not ROKU has a bad quarter due to Covig-19.
The problem is that overall ad spending is decreasing. There is simply no evidence that ROKU will be immune from this hit. If Roku shows slower growth or even negative growth for a quarter, what happens to the stock price?
What happens to their stock price if the virus is cured and the economy starts ramping back up? The problem with your question Naj is that you come on these boards and try to sow fear right at the time that everyone should be buying. You are a rare contrarian indicator
The problem with your question Naj is that you come on these boards and try to sow fear
There is no fear in a contrary opinion - else you run the risk of confirmation bias and halo effect.
Every decision requires a balancing - or else it is not a decision. I appreciate all opinions - negative or positive - which will allow me to make an appropriate decision
Except that “overall ad spend goes down” is actually popular opinion right now… it is still an opinion… but fairly reasonable one in the given environment… and reflected in most of the ad related stocks prices.
The contrary opinion is the one that says why Roku can benefit even with overall ad spend down… and there are good reasons to consider.
Harley mentioned above that time spent on Pluto TV increased by 75%… that’s a data point… also data point many shared that that food and other grocery store items are picked up from shelf left and right…
So a reasonable conjecture is that ad spend for these companies will increase… each one of these will try to maximize their sale in this market… there are other items like video games… home decor etc. whose sales likely to go up in this lock down times…
Now where can brands in these businesses find audience to maximize their sales… it would be where the eyeballs are and they are growing on freetv… as the datapoint on Pluto tv suggest… and Roku is main vehicle for such free tv…
so if you put it all together, it makes a contrarian opinion that despite headline ad spend going down, Roku has possibility of getting bigger sliver of the growing portion of the ad revenue…
The problem with your question Naj is that you come on these boards and try to sow fear _______________________________________________________________
There is no fear in a contrary opinion - else you run the risk of confirmation bias and halo effect. Every decision requires a balancing - or else it is not a decision. I appreciate all opinions - negative or positive - which will allow me to make an appropriate decision
Jeff
I agree Jeff, no argument there. But remember Saul talking about Trolls and Carver asking where the Trolls are?
Well if you had been on this board as long as some of us, you would have realized what Saul was talking about. Naj has come on this board during multiple down turns to try and troll people. That isn’t helpful. Everyone knows what is going to happen if any company loses Revenue and slower growth. What would have been helpful if Naj had analyzed Roku and told us what Revenue he thought would grow at this time and what might shrink. That is something I have never seen him do on this board, or any board.
The problem with your question Naj is that you come on these boards and try to sow fear right at the time that everyone should be buying. You are a rare contrarian indicator
Andy
Hi Andy, I knew someone would post a thoughtless reply like this. I have been buying, started last week so too early.
I’m long ROKU.
So according to you I guess that fact cements ROKU will now drop even further?
“Except that “overall ad spend goes down” is actually popular opinion right now… it is still an opinion… but fairly reasonable one in the given environment… and reflected in most of the ad related stocks prices.”
It will be interesting to see if popular opinion wins the day. We certainly will not know the answer to this question about if “overall ad spend goes down” today, tomorrow, next week or next month. We will need enough data for this to be proven statistically significant to the point where ad spend goes down enough to impact valuations. Perhaps many will make the assumption that ad spend goes does in the extreme short term just as a reactionary movement to market/pandemic panic. However, does the reactionary movement possibly result in long term pull backs that impact revenue and valuations…tbd.
I welcome your presentation of the contrarian opinion which I have been considering. Think about the converse for a moment. With mobile usage up 30% in China and as much in other countries and with viewing hours up on CBS’s PlutoTV as much as 75% the first week of March; maybe, just maybe the ad buyers for products and services are extrapolating this across across all mobile and streaming and see this as an opportune time to catch an ever increasing number of “eyeballs” during this unprecedented time in U.S. history.
Recession should decrease ad rev. But ad rev have already dropped due to cancellations of live events. When I watch TV I continue to watch ads. Plus Recession may accelerate cord cutting due plus free AVOD use may rise purely as a result of cost cutting. Advertisers have to reach someone.
I am in the contrarian view. Streaming hours are through the roof. That is a given. And having more time for streaming means more exploring other content like PlutoTV, many of which are better monetized by Roku. Particularly by people who are hard up for cash and looking for free entertainment. How many people will finally cut the cord to cut out one more expense? As the CEO pointed out somewhat recently, only 3% of TV ad budgets currently is OTT. This could permanently alter that ratio. Probably significantly, even if it’s a smaller whole. All services are ramping up available content.
And then you have movie theaters closing and studios scrambling to put current movies for rent on services like Fandango, Vudu, and Row8. $20 rentals. Don’t know what the distribution deals with Roku are like, but transactional is the third pillar of their content monetization. And those studios and services are purchasing promotion and ad space for this new line of business.
And Roku sticks are the new toilet paper. Increasingly hard to find in stores. Definitely a demand issue, hopefully doesn’t turn into a supply issue. Amazon for instance is out of the Roku Streaming Stick+ until April 15. The other Roku devices are also out of stock until the end of the month. FireTV sticks are also selling out.
And Roku sticks are the new toilet paper. Increasingly hard to find in stores. Definitely a demand issue, hopefully doesn’t turn into a supply issue. Amazon for instance is out of the Roku Streaming Stick+ until April 15. The other Roku devices are also out of stock until the end of the month. FireTV sticks are also selling out. https://www.amazon.com/Roku-Streaming-Stick-HDR-Streaming-Lo…
Easy to get at BestBuy. I just bought one there this week.
I was second guessing myself over the weekend having added to ROKU last week, feeling I’d jumped the gun. With today’s 25% pop I’m feeling a little better about my decision. I do still think we have a ways to go yet and the overall markets could easily drop another 10 - 20%, but ROKU was beaten down worse than many others, and I personally don’t think there’s going to be THAT much of an impact from decreased ad spend over the next few months.
But a counter argument:
I was looking at the 2008 recession. Google rev did drop quite a bit. But Google was much bigger (25times bigger!) than Roku is now. But still someone could have argued TV ad rev, not online search rev should have dropped at that time. Despite this I still feel Roku has been oversold.
Laura Martin is very bullish on Roku… as you can tell from her $200 target…
On the price gyration… I believe last week a major holder had to sell millions of ROKU to address a margin call… that depressed stock further more than general environment… hope today’s bounced up price sustains a little bit!
