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Reuters / Brendan McDermid
- Roku, provider of smart TVs and an extremely popular streaming platform, has grown 240% since the beginning of the year.
- Markets Insider has spoken with three Wall Street badysts to explore the indicators, initiatives and trends that have helped to increase the market value of Roku this year.
- Analysts have alluded to Roku's ability to secure low-cost content to the way the company is positioned to absorb subscription revenues from new streaming platforms. the market.
- Watch Roku's trade live.
The race to dominate the world of streaming is launched. Businesses are spending billions of dollars to acquire content rights and create video platforms for the general public. Until now, the company whose growth is faster than that of giants such as Disney, Netflix and Amazon is a society without content.
It would be Roku, which sells smart TVs and an extremely popular streaming player. California-based Los Gatos has seen its price rise by more than 240% since the beginning of the year.
Roku acts as an operating system for streaming. Rather than owning content, it brings the fragmented market together by providing a single location for access to a variety of high-end multimedia services such as Netflix, Hulu and HBO. Roku also offers its own ad-supported streaming option called The Roku Channel.
Markets Insider has spoken with three Wall Street badysts about the top five factors behind the sharp rise in Roku in 2019. Here's what they said:
(1) Every business wants a piece of television and a movie streaming, which is a good thing for Roku.
The direct-to-consumer broadcast space is about to become much more crowded, with notably Disney Plus, Apple TV Plus and AT & T's HBO Max expected to be rolled out in the coming months.
Mark Mahaney, managing director and badyst at RBC Capital Markets, says it's good news for Roku.
Indeed, Roku is positioned to take advantage of the launch of new streaming platforms. If subscribers subscribe to a streaming service on Roku, the company retains some of that revenue.
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"Roku wants to be the Switzerland of streaming, the operating system that all users have to get the big platforms," Mahaney told Markets Insider. "The role of a Switzerland is much more valuable in a world where there are several superpowers rather than just one."
(2) Roku is the brand name of smart TVs.
Mark Zgutowicz, Senior Research Analyst at Rosenblatt Securities, said that Roku's efforts to position itself as a benchmark company for low-cost smart TVs have helped it beat competitors like Fire TV from other companies. ; Amazon.
"You can not underestimate the importance of the brand," Zgutowicz told Markets Insider. "Despite the price, competitive content and interface of Fire TV, you see a lot more brands around Roku and that's really what sells in the end."
Roku's brand efforts seem to be paying off. Anthony Wood, founder and CEO of the company, said during a conference call about the profits that a smart TV sold out of three in the US in the last quarter came from Roku.
(3) Low cost content
Companies with gigantic content portfolios such as Disney and Comcast are eager to create streaming platforms, and existing services such as Netflix and Amazon Video are investing billions of dollars in new programs and programs. new movies. Instead, Roku has doubled its position as a content distributor and operating system.
The company's lack of "Roku Originals" could play in its favor. Alicia Reese, Senior Associate and Equity Researcher at Wedbush Securities, said that Roku's strategy of buying obscure, low-cost content, not found elsewhere, has helped it compete with major content owners.
"Roku does not need to own the content, as long as it has relatively inexpensive but compelling enough content for the Roku channel, it can continue to keep an eye on its platform . " Reese said.
(4) international growth
Investors are also interested in Roku's prospects for international growth, which continues to reach a higher level of penetration in the United States.
A recent report from Strategy Analytics, an industry data and research provider, found that up to 41 million Roku devices are currently in use, accounting for 15.2% of all streaming devices in the United States. -United.
"I think that they would get reasonable success in the international markets as an operating system and as a platform for streaming funded by advertising and streaming through subscription. "said Mahaney.
(5) profit potential
Roku lost $ 9.7 million in the first quarter of 2019, up $ 6.6 million from the same quarter last year.
Reese said that Roku was spending money in hiring new talent to grow globally, but that they could pull off that hiring if they needed it. .
"They have full control over their profitability and now they are investing very consciously in the business to expand internationally," she said.
The key indicators to consider for Roku are average revenue per user and active accounts, which, according to Reese, aims to make investors more concerned than profitability.
"If they can increase the money they receive from each account, it's a very good sign," she said.
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