This year hasn’t exactly been a great one for highly-anticipated initial public offerings. The most notable example is Snap Inc (NYSE:SNAP).
Some experts thought that the social media turned camera company could convert its base audience’s enthusiasm into market success.
That hasn’t worked out very well. With Roku Inc (NASDAQ:ROKU) just recently launching its IPO, can ROKU stock avoid disappointing early-bird investors?
On the surface, the Roku IPO doesn’t immediately inspire confidence.
At best, the proposition is seemingly a mixed bag. As InvestorPlace writer Tom Taulli points out, the competition in the video-streaming business is ferocious. Apple Inc. (NASDAQ:AAPL) has its Apple TV service. Amazon.com, Inc. (NASDAQ:AMZN) and Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) have their own streaming platforms which they’re aggressively pushing. If ROKU stock is to succeed, the competition won’t make it easy.
Investors shouldn’t get too complacent with the fact that, for now, “ROKU is the largest player in the market, with 15.1 million active accounts,” per Taulli. Snapchat is more popular with teens and young adults compared to social-media king Facebook Inc (NASDAQ:FB). But as previously mentioned, Snap Inc couldn’t convert their advantage into market profitability.
Of course, many reasons exist to explain this dynamic. One of the biggest, though, is that Facebook kept the pressure on and began to steal away market share. Moving forward, investors will want to see that ROKU stock doesn’t share Snapchat’s competitive vulnerabilities.
But even with evidence, Wall Street is leery about the Roku IPO. Another highly-anticipated debut was Blue Apron Holdings Inc (NYSE:APRN), which failed from the get-go. Currently, APRN shares are down more than 45%. Hindsight being 20/20, it would have been better for proponents to wait.
ROKU stock can Succeed where Others Failed
Taulli ultimately believes that you should exercise patience with the Roku IPO. I’m not about to disagree with him. Based on what we have seen this year, when the party ends,
it ends abruptly and painfully. Even big-shot names like Facebook experienced volatility near its launch before eventually dominating the markets. Surely, waiting is the reasonable course of action.
On the flipside of that argument, we have to be careful about treating ROKU stock like other IPOs. The comparison to Snap Inc and Blue Apron occur solely because of time frame. In reality, ROKU doesn’t share much in common with either name.
For instance, ROKU is, as Taulli mentioned, the dominant player
in its industry. Snap only led in a narrowly-defined demographic, and one that’s typically cash-poor. Thus, I’m more inclined to compare ROKU stock with Facebook, not some confused animal like Snap.
Switching over to Blue Apron, Amazon killed the food-subscription company when it announced the Whole Foods Market, Inc. (NASDAQ:WFM) buyout. By integrating Whole Foods assets, Amazon could wreak havoc on Blue Apron.
But Blue Apron’s situation doesn’t apply at all to ROKU stock. No one’s launching a surprise attack on ROKU because the competition is already a known factor. More importantly, the streaming company has duked it out with the best of them, and it still remains on top.
We should also consider that big-name brands don’t always equate to big-name performance. Despite its feared presence in smart devices, Apple lags ROKU, Alphabet, and Amazon in the connected TV market. A recent Forbes article detailed Apple’s multiple missed opportunities.
Yes, ROKU stock faces intense pressure, and management cannot afford to let up at all. Still, the company deserves the benefit of the doubt.
The Roku IPO Is Worth the Risk If You Can Stomach It!
This is not an open invitation to jump full board with the Roku IPO. The nature of the beast is extremely speculative. I personally have never invested in an IPO, nor have I invested near a debut. Primarily, I have no technical data to gauge potential price movements.
That said, if I were to take a shot at a freshly-minted security, I’d go for ROKU stock. In my opinion, the company is far different from the flawed or vulnerable firms that recently debuted. Furthermore, streaming content is the future. You can look at it from your own personal observations. You can go granular, and pull up data demonstrating declining demand in traditional media.
Whichever way you want to approach it, cord cutting is “a thing.” This dynamic is yet another tailwind for the Roku IPO.
Bottom line, investing at or near a debut is not for everyone. Despite what I believe are more positives than negatives for ROKU stock, it can collapse like any overhyped investment. But overall, due to its market position and the strength of its market, the Roku IPO could be the rare one that hurts you if you wait too long.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.