Roku (NASDAQ:ROKU) has only been around for about 16 years now, but it has become the go-to streaming platform in that short amount of time.
What’s a streaming platform? Well, in the old days — like two years ago — cable television was king. If you were a consumer, you paid a provider (or if you were very lucky, you were able to choose among various providers) that would offer you channels and packages of audio, video and gaming entertainment.
You would pay a monthly fee to get your package, as well as equipment fees and any on-demand movies or extra, premium packages.
Because it was so costly to be a cable or satellite provider, there were significant barriers to entry. It was also difficult because some content providers had strategic relationships with some of the cable providers. And when certain shows became popular on second-tier content providers, they began to up their licensing fees, which became a mess for cable providers.
ROKU Stock and the Streaming Revolution
But as streaming services became more reliable and bandwidth grew, it was possible to basically use the internet as the cable company. You could watch movies off your Netflix (NASDAQ:NFLX) or Amazon (NASDAQ:AMZN) account, for example — if you had an internet-ready television. If not, it got complicated, fast.
ROKU saw an opportunity in the streaming services. It bundled a content providers into its platform, in essence providing channels that a cable or satellite company would do, but without the monthly fees. If you had a Netflix or Amazon account, you could access the accounts through your Roku streaming device. All you paid for was the Roku device. If you wanted to subscribe to channels that cost money, you could subscribe to exactly what you wanted, for as long as you wanted.
Roku makes its money selling its streaming devices (usually around the $50 price point) and also makes it from fees from advertisers and content providers.
At this point, ROKU has 22 million active monthly accounts. That’s almost double the number of accounts it had just two years ago. ROKU estimates that in 2017, 14.8 billion hours of content was streamed on its devices.
This isn’t a disruption as much as it is a transition from legacy content providers to a new platform and pricing model. Remember, all those active ROKU subscribers are likely no longer cable and satellite customers. And those cord-cutters’ numbers are increasing rapidly.
The other thing about ROKU is, it’s not geeky or designed for the tech set. It’s incredibly easy for anyone to set up on one TV or a houseful of televisions. And its customer service is very good if you still need assistance. As long as you have a decent internet connection, you’re ROKU ready.
And now, ROKU is partnering with various lower priced television makers, embedding its platform onto their sets as a value added bonus. And its new streaming devices are help usher in lower priced 4k viewing for consumers.
There are a lot of reasons ROKU stock is up 175% in the past 12 months — and there are even more reasons that it will continue to rise for years to come.
Louis Navellier is a renowned growth investor. He is the editor of four investing newsletters: Growth Investor, Breakthrough Stocks, Accelerated Profits and Platinum Growth. His most popular service, Growth Investor, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.