Roku Inc (NASDAQ:ROKU) stock can’t be stopped. Ever since its first earnings report as a publicly traded company, ROKU stock has skyrocketed from $19 to $48.
The meteoric, 150% rise in ROKU stock price has been accompanied by analysts constantly upping their price targets on the stock, hopes that the company will both enter and dominate the smart-speaker space, and constant claims that Roku is a pure-play on a huge trend in over-the-top (OTT) TV-viewing.
All in all, it seems like Wall Street is convinced ROKU stock will follow in the footsteps of Netflix, Inc. (NASDAQ:NFLX).
That is, everyone except for me.
Roku Will Get Squeezed Out of the Market
I don’t buy the ROKU hype. Roku is in the right space (OTT TV-viewing) and employs the right business model (they are focusing on high-margin software revenues, at the expense of low-margin hardware revenues), but that is where the positives end.
The Roku Streaming Stick isn’t noticeably better than Google Chromecast, made by Alphabet Inc (NASDAQ:GOOG,NASDAQ:GOOGL), or the Fire TV stick, made by Amazon.com, Inc. (NASDAQ:AMZN). By the same token, Roku TV isn’t noticeably better than Apple TV.
In this sense, the company sells an easily commoditized tech hardware product, much like GoPro Inc(NYSE:GPRO) and Fitbit Inc (NYSE:FIT) do. Also much like GoPro and Fitbit, Roku is competing against the biggest and most resourceful players in the tech world.
The big kicker here is that Google, Amazon, and Apple Inc. (NASDAQ:AAPL) can integrate their streaming device players with a broad array of other smart home products. Sony Corp (ADR) (NYSE:SNE) just rolled out an update to its Android TVs that enables Google Assistant.
Amazon Fire TV has a similar integration with Alexa. Same with Apple TV and Siri.
Roku has no such integration capability, and that puts the company at a huge disadvantage. As smart TVs and streaming media products transform into all-in-one hubs for smart home tech, Roku streaming devices will become a relic of the past.
In other words, Roku is Fitbit and GoPro all over again. We’ve all seen this rodeo before. The only way this ends is in disappointment for ROKU stock. The big question is when this bubble will burst.
It might happen sooner than you think.
Roku Is Less Popular Than Other Options
Given the performance of ROKU stock recently, you would think that the company had a superb Black Friday and Cyber Monday.
But my research suggests otherwise.
Because all shopping is going digital these days, most shopping trips start with a Google search. Thus, a great way to gauge consumer interest on a product is by checking Google search interest trends.
A quick look at the Google search interest trends for different streaming media players provides a strongly bearish read on Roku’s popularity.
Not only do Roku products, like the Streaming Stick and Roku Express, have significantly lower search interest than Google Chromecast and the Amazon Fire TV Stick, but they also didn’t get the same huge Black Friday + Cyber Monday search interest bounce that Chromecast and Fire TV benefited from.
Overall, search interest trends indicate two things: 1) Roku products are still far less popular than Chromecast and Fire TV, and 2) Roku underperformed peers during Black Friday and Cyber Monday.
These findings are corroborated by the best selling lists at Best Buy Co Inc (NYSE:BBY) and on Amazon.com. At Best Buy, both the Amazon Fire TV Stick and Google Chromecast are better sellers than any Roku product. On Amazon.com, the Fire TV Stick and Amazon’s suite of voice assistant products are all better sellers than any Roku product.
Bottom Line on ROKU Stock
This certainly feels like a bubble. Roku isn’t a pure-play on the OTT TV-viewing trend. It is the second-coming of Fitbit and GoPro.
Given relatively depressed demand during Black Friday and Cyber Monday, I think this bubble will pop soon.
When it does, this is a “look out below” situation.
As of this writing, Luke Lango was long BBY, AMZN, NFLX, and GOOG.