It would seem that the rise of the so-called ‘streaming wars’ between big names like Netflix (NASDAQ: NFLX), Disney (NYSE: DIS), Apple (NASDAQ: AAPL) and Amazon (NASDAQ: AMZN) is having a knock-on effect on for the online media player Roku (NASDAQ: ROKU).
What is boosting Roku?
The main reason behind Roku’s boost yesterday is that analysts have begun backing the company to benefit from the success of the big streaming giants, as well as an impressive showing at the Consumer Electronics Show last week. Among the takeaways from CES in Las Vegas, analysts raised active account estimates for the end of 2019, mostly due to its adoption of Disney Plus integration. Disney Plus has reportedly added more than 20 million subscribers since its November launch, which is expected to have brought many new subscribers to Roku in turn.
Wall Street is bullish on the brand-agnostic service, as it can also support all the other major players such as Apple TV+, Netflix, Amazon Prime Video, Hulu and more.
How has Roku stock performed?
It has been a rocky start for Roku, and yesterday’s rally actually served to recuperate a 3% loss since January 1st, having started the year up nearly 5%, then falling again. As well as this, the stock is still more than 25% off its all-time highs set in September 2019.
On the other hand, the stock experienced a meteoric rise in 2019 and is up more than 220% year-on-year.
Where does Roku go from here?
Things were looking quite bleak for Roku in the period between September and December last year. Its stock plummeted 16% following a disappointing earnings call in September, trumped only by Comcast’s (NASDAQ: CMCSA) 28% nosedive. Then in November, Roku fell another 15% after Morgan Stanley (NYSE: MS) gave it an ‘underweight’ rating.
Of course, there are problems facing Roku. It has no true moat for its service — Amazon Fire TV is a direct competitor, boasting 40 million users.. As well as this, the service is relatively free after the point of sale, meaning that the majority of sales of the device may not result in additional revenue from the consumer.
However, Roku does make money from advertising on the platform, as well as taking a cut from companies that use the service for their streaming products. Roku’s U.S. ad revenue is expected to more than double to $632.9 million in 2020
As well as this, Roku has a base of just over 32 million active accounts — a number which jumped 36% in 2019 — in comparison to 20 million Disney Plus accounts, 160 million Netflix accounts, and millions more on other services. With so many options becoming available last year, and more on the way in 2020, there is still room for massive growth for Roku, who may benefit from people who want to keep all their accounts in one neat little place.
Read more about Roku here:
MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.
Editor at MyWallSt
Jamie is the Content Editor here at MyWallSt. His favorite stock is Apple, which is also the first stock he ever bought. Jamie is not only a big fan of its products, but he believes that the tech giant has a whole lot more to give the world, and hasn't even scraped the surface of its potential.