Roku, Next Big Tech Flop Or Opportunity?

Tech stocks are partying like it’s 1999, the Nasdaq is up nearly 30% this year, billion-dollar startups are attracting capital at the greatest rate since the dot-com crash and it’s been the busiest year globally for new stock listings since 2007, with 1,450 companies listing shares (mostly in Asia). Amidst this booming market, several high-profile companies have opted to go public, some like Snap and Blue Apron were enormous flops but the average new listing in the U.S is up 32%. One company that has been especially volatile since its IPO has been Roku.

Roku was one of the first companies involved in the now booming streaming business, and is mostly known for selling small plugin boxes allowing people to stream web content like Netflix and Hulu directly on their T.V. When it went public on September 28^th, Roku stock surged 68% to $23.50 a share making it the best performing new listing of the year. Unfortunately, the party did not last long, over the course of the next 5 weeks Roku stock was pummeled on concerns that it would not be able to compete with the likes of Amazon and Apple who had entered the hardware streaming business. Shares hit an all-time low of just above $18, leading up to the company’s 1^st earnings report on November 8th. However, Roku’s fortunes changed again as soon as it announced its 3^rd quarter earnings which showed how the hardware maker was diversifying. Shares surged over 100% in three days to an all-time high of $48.80. Since then the stock cooled off somewhat but remains volatile. Question is, does Roku deserve a place in your portfolio or is it just another overpriced and overhyped tech stock.

Roku Stock since it went public on September 28^th to December 4^th. Shares surged over 100% post-earnings.

Roku has long been an industry leader when it came to selling internet T.V gadgets, the rise of internet streaming and popularity of services like Netflix made Roku a player in an exciting and growing new field. The problem is the rise of internet T.V has attracted some large players. Roku, a company with a current valuation of just over $3 billion, must compete with the likes of Apple worth almost $900 billion and its Apple T.V as well as Amazon and its Fire Stick, not to mention competition from gaming consoles like Microsoft’s Xbox and Sony’s Play station, which also gives people the ability to stream internet content on their T. V’s. Investors and analysts have long been concerned that Roku would not be able to compete against these tech giants.