In late 2021 and early 2022, as the U.S. Federal Reserve hinted at upcoming interest-rake hikes, the market decided to punish tech stocks. Among the collateral damage was streaming-video platform Roku (NASDAQ:ROKU) stock as traders ruthlessly dumped their ROKU stock shares.
Chances are, those sellers will come to regret their haste. I expect that the analysts who lowered their ratings and price targets will also change their minds, sooner or later.
As InvestorPlace contributor Larry Ramer put it, the ROKU stock skeptics are misguided. To that, I’d add that the short sellers will be forced to cover their positions, probably sooner rather than later.
Still, there are folks who doubt that the streaming revolution is real and that Roku will remain competitive in the streaming space. Let the bears have their moment, I say, as the data will vindicate Roku’s steadfast stakeholders in the end.
A Closer Look at ROKU Stock
Surely, it’s no coincidence that the decline of ROKU stock coincided with the tech wreck that started last year. Again, the Federal Reserve’s hints at imminent interest-rate raises scared some tech-stock traders out of their long positions.
Also, the spread of the omicron Covid-19 variant strain was a contributing factor to the decline of Nasdaq-listed stocks. It was a perfect storm for technology stocks to tank, and that’s exactly what happened.
Meanwhile, Roku was posting strong financial numbers. As Ramer reported, the company’s third-quarter 2021 net income soared by more than 400% year-over-year, while Roku’s Q3 net revenue climbed 51% and the company’s trailing 12-month average revenue per user increased 49%.
Yet, because technology businesses were suddenly out of favor on Wall Street, ROKU stock fell below $300, and then below $200. As of early February 2022, the share price was down to around $154.
Even Boomers Are on Board
So, is this the right time to pick up some Roku shares at a bargain price? To answer that question, first we need to address the streaming skeptics who doubt that the cable-cord-cutting revolution is real.
“TV streaming has passed a tipping point” is the conclusion of a thorough research report issued by Roku and based on a survey conducted by the National Research Group (NRG).
With perhaps a slight insult but a valid point, the report declared that “even Boomers find it easy” as companies like Roku have made streaming hardware and software more user-friendly.
The data backs up the point here, as 40% of streaming Baby Boomers added more streaming services during the past year (as of July 2022, presumably, since that’s when the survey was conducted).
Moreover, nine out of ten Boomers who stream said that TV streaming devices are really easy to use. Meanwhile, 98% of Gen Z, 96% of Millennials, and 86% of Gen X are streamers, so obviously younger consumers are on board.
Dominating in North America
Now, we need to determine where Roku fits into this multi-generational shift to streaming. Is the company competitive in this space?
Indeed, Roku is not only a competitor, but possibly even a dominator. This is particularly true in North America, as a pair of press releases prove.
In early January, Roku proudly announced that, for the second year in a row, the Roku Operating System was the number-one smart TV operating system sold in the U.S.
Then, in a North American one-two punch, Roku followed that announcement up with a separate press release pertaining to the Canadian streaming market.
In particular, a study determined that Roku is the number-one TV streaming platform in Canada, based on hours streamed.
Arthur van Rest, VP International at Roku, took the opportunity to celebrate this notable achievement.
“Providing simplicity, entertainment, and value is clearly resonating with Canadian consumers, who are choosing our platform to stream TV,” van Rest stated.
The Bottom Line
ROKU stock declined, yes, but so did technology stock generally. It’s possible that investors overreacted, thereby creating a prime bargain-buying opportunity.
As for the streaming skeptics, it’s time to get on board with the cord-cutting movement that’s already in progress. The data, as we’ve discovered today, shows that the streaming revolution isn’t limited to younger demographics.
And if you’re prepared to join that revolution, then feel free to consider a position in ROKU stock. From Zoomers to Boomers, just about anyone can “find it easy” to profit from this trade.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.
