Every now and then you will run across a good stock that falls on hard times. When that happens, it begs the question: Is the pullback a sign of long-term problems? Or this simply a chance to buy on a dip?
For Roku (NASDAQ:ROKU) stock, definitely count me in the camp of the latter.
Roku is the streaming platform that goes head-to-head with products owned by some of the biggest and baddest companies on Wall Street. Roku is holding its own with the Amazon.com (NASDAQ:AMZN) Fire TV, Apple (NASDAQ:AAPL) TV, Alphabet’s (NASDAQ:GOOG, GOOGL) Google Chromecast and the NVIDIA (NASDAQ:NVDA) Shield TV Pro.
Roku is a direct beneficiary of the cable-cutting trend that swept over the U.S. and its products will continue to be in demand.
Let’s take a closer look at ROKU stock.
ROKU Stock at a Glance
ROKU stock is trading at $97 per share, but that’s way down from September 2019 highs, when the stock touched $170. Over a 12-month period, Roku is up 35% but has dropped nearly 28% since January 1.
The company has a market cap of $11.6 billion and has strong sentiment from analysts — of 19 analysts who cover the stock, 13 ranked it in February as a “strong buy” or “buy.” Roku stock also has an average price target of $151.22, suggesting a potential upside of more than 50% from current levels.
The company reported Q4 revenue in February of $411 million, which was better than the $392 million analysts expected. EPS was a loss of $0.13, which was a penny per share better than analysts had forecast.
But the stock tumbled following the double beat because of disappointing guidance. Roku is expecting first-quarter revenue of $300 million to $310 million, gross profits of $143 million to $148 million and a net loss of $55 million to $60 million.
For the fiscal year, the company is expecting sales of $1.6 billion and an EPS loss of $1.21 per share.
ROKU Is Primed For Long-Term Success
Roku is spending money to ramp up its customer base — and it’s working. Look at these 2019 numbers:
- Year-over-year revenue growth: 52%
- Platform revenue growth: 78%
- Active accounts increased 36% to 36.9 million in 2019
- Average revenue per user increased by 29% to $23.14 in 2019
Roku has taken the strategy of making its product available in multiple formats and price points to get as much as the streaming customer base as possible. Nearly one in three smart TVs sold in 2019 were Roku TVs, the company says.
Roku also markets low-priced Roku Express products that allows customers to stream 1080p quality video into their televisions, and it sells a $100 Roku Ultra product for customers looking for a high-end product.
And finally, Roku is taking a page from Netflix (NASDAQ:NFLX), Apple, Amazon and Hulu in exploring original content. Original content is a big draw for streaming services – think about the popularity of “Stranger Things,” “The Handmaid’s Tale,” “The Morning Show” and “The Marvelous Mrs. Maisel.”
Original content will help transition Hulu from merely a service of other streaming services into a competitor. Roku already has a built-in audience and a platform in its Roku Channel. While the discussions are being characterized as merely preliminary, original content would only add to the buzz the company has with customers.
ROKU Stock in the Short Term
Every stock you look at these days has to be seen through the lens of the COVID-19 coronavirus that so far has sickened more than 120,000 people worldwide and killed more than 4,000. With schools shutting down, states issuing warnings, the National Guard isolating a New York community and some sporting events being cancelled, there’s a lot of fear that is weighing on the stock market.
So in an age of self-quarantine and isolation, what would be better than staying home and streaming some video with your Roku device?
It is going to be fascinating to see how streaming habits are affected in Q1 as the coronavirus fears take hold, but any boost in viewership and usage will only serve to give ROKU a boost.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.