ROKU

Although most of our companies were down today, likely on profit taking from MACRO fears upcoming; ROKU in particular took a larger hit due to news about Amazon Prime Day shopping event on July 15 and July 16 to show off their new Toshiba Television that directly competes with ROKU and offer a 40% discount on it.
Roku certainly could get hurt by this aggressive move by AMZN and I know to not take AMZN threats lightly.
What are you guys thinking of doing on the news? Buy the dip for the long or sell out?

“to show off their new Toshiba Television that directly competes with ROKU and offer a 40% discount on it.”

It’s not new, though. It’s been around for a while (reviews on Amazon’s website go back about a year, maybe more) and Roku has managed to do well during that time.

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I guess the 2 day event where they offer a 40% discount in hopes to get sales is the new info then.

A couple of big questions should be answered:

  1. What is the useful life of a Roku (or other aggregator tool)?
  2. What is the useful life of a TV (smart with tools like these will continue to be a desirable one stop option in the future)?
  3. Will innovation in aggregator tools continue to be best in class vs “smart” TV type products?

I think Roku is taking advantage of a technology shift that will catch up to them. In the time between legacy TV use + Roku/other and fully enabled, integrated units, Roku has its niche.

Will Roku eventually partner with display OEMs to accelerate this trend and “Roku Inside”? That would be one of my strategies if I was driving the bus at the company.

TV replacement cycle:

–2014-- https://www.prweb.com/releases/2014/06/prweb11933890.htm
“The TV replacement cycle is similar to last year – approximately eight years in mature markets and six years in emerging markets – which can be attributed to two primary factors: first, the majority of legacy sets in household inventories have already been replaced, because of ongoing replacement cycles; and second, in most countries the transition to digital broadcasts is complete and there are few compelling reasons for consumers to replace their existing TVs. Change in the year-over-year replacement cycle has been under 10 percent for most countries in mature markets, which indicates a slowing demand.”

New features ranked 8th as a general category of desired reason for upgrade, although this is a generic category. I believe this trend has shifted to features now the picture quality exceeds the threshold for viewing in most household installations (1080p). This would place “smart” features higher in the list.

The average age of TVs is also shown on graphs at that site.

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This was my initial thought on the matter. The market obviously reacted swiftly as it does but in reality as shown by their last earnings report Roku currently holds the lead, which allows them the platform to use to funnel their ad campaign, which brings in the real revenue dolllars. Even if amazon does come out with a competing product I believe it will be slow to adapt and shouldn’t change the revenue growth much for Roku for at least a few quarters. In the meantime the hope is the stock appreciates enough to when/if amazon does catch up I can exit with a nice gain.
Therefore I added a few shares on this dip

I’m not convinced ROKU dipped because of this announcement. Pretty much all of our Saul stocks have dipped the last few days.

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I know my account has been plummeting the past 4 days. Sucks because I bought more mdb on strength so now it’s a double whammy. Apparently its all the large caps, defensive stocks and utility’s leading the market currently. It certainly is hard to just hold steady when we see the market making all time highs and our portfolios dropping about 6% or more in just a few days.

Will Roku eventually partner with display OEMs to accelerate this trend and “Roku Inside”? That would be one of my strategies if I was driving the bus at the company.

That is exactly their strategy. Roku TV has become embedded in Smart TVs and is now the no. 1 Smart TV Operating System in the US. Here’s the trend.
2017 - 1 in 5 Smart TVs sold in the US comes with Roku TV
2018 - 1 in 4
2019 - 1 in 3

Whats in store for 2020? Probably more of the same.

Now who has the edge between Amazon and Roku? Currently its Amazon.

Amazon Fire TV - 34 million active users
Roku TV - 29 million active users

How does Roku make money? The no. 1 method is by advertising and by what they call their platform business. From Q1 2017 to Q1 2019 their revenue from their platform business went from 36.4% to 64.9%. That means they shifted their strategy from making money on hardware to making money on ads/platform.

Also, Roku’s total hours streamed continues to accelerate.

  
             Q1       Q2       Q3       Q4
    2018    54.5%    57.1%    60.5%    69.8%
    2019    74.5%

I understand the idea that Amazon could beat out Roku but I really don’t think this is a winner take all scenario. There is room for both. Also, over and over again we see the little guy who is hyper-focused on their 1 product beat out the large behemoth who has 1,000 other products to focus on.

-AJ (Long ROKU but only a small 2% portfolio allocation)

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Will Roku eventually partner with display OEMs to accelerate this trend and “Roku Inside”? That would be one of my strategies if I was driving the bus at the company.

Personally I think the biggest threat to Roku is coming from Apple.

Apple today previewed tvOS 13, the operating system that makes Apple TV 4K the easiest and most personalized entertainment device for enjoying TV shows, movies, music, photos, games and apps on the biggest screen in the home. With tvOS 13, Apple TV 4K gains an immersive new Home screen; multi-user support for customers to access their own TV shows, movies, music and recommendations; support for Apple Arcade; expanded game controller support; and new 4K HDR screen savers filmed under the sea…
Source: https://www.apple.com/newsroom/2019/06/tvos-13-powers-the-mo…

Most of the hardware that supports Roku within a TV isn’t any different than the hardware that supports Fire TV. It basically runs some sort of video OS. According to Apple’s recent press Apple TV+ will soon be an app that can run on either Roku or Fire TV… It wouldn’t surprise me if TV manufacturers eventually bypass the middleman and offer systems that include both Roku and tvOS. If they do then I’m sure many customers will lean towards running tvOS (Apple does a great job of designing user interfaces).

Apple is bringing its TV app to smart TVs and even Roku and Fire TV boxes…
See: https://www.google.com/amp/s/www.macworld.com/article/340300…

One always needs to keep an eye on the competition. IMHO, if Apple ever blends their TV and Home Pod (it would be a great sound bar) into one product then they’ll dominate the smart device market…

Take care,

VR_Robear

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