Although many of you are probably familiar with our consumer facing presence of streaming players, streaming sticks, and Roku TV models, you may be less familiar with our business model. The majority of Roku’s gross profit and growth comes from our platform segment. As the method of content and advertising distribution shifts from legacy video distributors to OTT platforms, Roku is building large revenue streams on TV advertising, audience development and content distribution. We believe we are at the beginning of a tectonic shift in TV advertising, where a portion of the roughly $70 billion in TV advertising today is now moving to TV streaming.
One reason we compete so effectively is our purpose-built TV OS. Operating systems typically don’t make the transition from one type of device to another. For example, mainframe operating systems did not transition to PCs, instead Microsoft Windows became the OS for PCs. Windows did not make the transition to phones as Android and iOS became the operating systems for phones. Android and iOS have not replicated their position with mobile phones to TVs. Roku is the leading licensed OS for TVs. Roku is purpose-built for TV, which gives us an advantage because we can run an intuitive platform on low-cost hardware and provide a better user experience to consumers and licensing partners that is less expensive than our competitors.
They are competing against Amazon (Fire), Google (ChromeCast), and Apple, so they are not going up against lightweights. However, so far they seem to be doing pretty well.
I had noticed that Roku has more than doubled since about 6 trading days ago (maybe less days than that). I had added them to my “possible short” watch list, so this jump has definitely been surprising to me. I haven’t taken much of a look at Roku to this point, but with their IPO, I didn’t think their proposition was all that promising. I guess I might have been mistaken.
I have a Roku TV. Had it for about a year. It was the latest model then. Did a lot of research and concluded for my needs it was the best box to get.
Would I buy the stock? Big fat no.
Despite using the hardware, I never once had an inkling to even investigate the stock. I don’t think it has significant staying power, let alone competing power, Vs the Goliaths. Its biggest selling point is it’s neutrality. I can use Netflix and Amazon and YouTube on it. (Haven’t tried apple but I assume you can).
But apart from the neutrality, which is a big thing I admit, it’s got nothing else. Doesn’t have the polished feel of an apple product. Plus, I reckon most future TVs will have inbuilt software that makes all these sticks redundant.
I think within 10 years Roku will go the way of dodo. This doesn’t mean it won’t do incredibly well for the next 2, 3 years. But given my belief that it has no long term competitive advantage, I’ll steer clear of even looking at the financials.
I do not own any stock in Roku. I do, however, own 3 of their devices and am generally happy with them. What I like best about them is that they make it really easy to cut the cable (sorry Disney). But, I do think that their OS has some room for improvement.
Before investing or shorting, I would recommend reading the latest earnings release and associated call transcript. I think that they are looking to make some changes that will keep them relevant and generate income over a longer period than some might think.
Unlike the dodo, they have better resources to enable them to evolve rapidly.
I think that the recent acquisition of Dynastrom is interesting and Phillips deal does not hurt. If they stay strictly a hardware platform of stick devices and TVs, then I think that there should be some concern. But there is no reason that they have to do that, especially with fresh capital. Amazon may have started with books, but they did not stay there. Not saying that Roku is anything like Amazon, just saying that one should look beyond just their current product offerings.
I have had Roku boxes but not thought of buying their stock. If they just end up selling their boxes or do some sort of licensing deals to integrate their software, then the range of products seem to niche. Maybe not bad as part of a company but not enough to be the entire company. It is too easy to get replaced.
NVDA actually has their own competing box to the Roku called The Shield which usually gets better recommendations though at a higher price.
I have been using a Shield now for 2 years and never thought of going back to a Roku or AppleTV.
They are competing against AppleTV, NVDA Shield, AmazonFire, Google ChromeCast, Smart TVs and legacy BluRay players that also embed the same ability to be a media player and content streamer. Not to mention countless other media streaming devises coming out of Taiwan and China.
I am not sure I would want to hold shares in a company that’s entire product range is nothing but a blip to their competitors product ranges
I am not sure I would want to hold shares in a company that’s entire product range is nothing but a blip to their competitors product ranges
While that’s true, the competitive products lack the breadth of channels that Roku offers, and because they are mere “blips” they don’t receive the level of development seen in Roku streaming hardware. Indeed the skirmishes between Amazon, Apple, and Google leave gaps in their streaming capabilities.
That all said, the value in Roku is as a buyout candidate.
Yes, its OS needs some modernizing, but that is a minor quibble.
That all said, the value in Roku is as a buyout candidate.
I think that there is a lot of truth to that. I wonder if a part of their reason in going after Dynastrom was to offer a more complete package to a potential suitor.
Crazy thought, I wonder if NFLX sees them as a target for pushing their platform and offering more competition to Apple and Amazon in the streaming world. Hmmmmmmm…
Thanks for all the replies. I decided to get out of ROKU. After doing some more research, I agree with the posters who said that ROKU basically faces too much competition from the big dogs and doesn’t have much of a competitive advantage.
