If you want to find a way to profit off how the novel coronavirus is changing our future society, one place you should be looking to is streaming media stocks. That’s where Roku (NASDAQ:ROKU) stock comes into play.
As most of us are living under stay-at-home orders and social distancing during the coronavirus pandemic, many streaming media services are reporting surges in volume.
And with nothing but time on our hands and no place to go, streaming media is the go-to option for many.
While streaming stocks like Netflix (NASDAQ:NFLX), Disney (NYSE:DIS), and Amazon (NASDAQ:AMZN) are obvious plays here, investors shouldn’t forget about Roku. Roku not only has its own streaming service, but it also provides the bridge that allows Netflix, Disney+, and Amazon Prime to air on the TV.
Let’s take a closer look at Roku stock, which is having an up-and-down year so far.
Roku Stock at a Glance
Roku is down about 6% year-to-date, but don’t let that bother you. This is a stock that has seen plenty of peaks and troughs over the last couple of years.
Last September, ROKU was at $169 before cratering in a matter of days to $103. By November it bounced back into the $160s, then began a slow tumble all the way into last month, where it bottomed out near $60.
Now ROKU is back on the rise again, at more than $120, as bulls are showing optimism over the company’s latest growth numbers.
Roku reported on April 14 that it added nearly 3 million new accounts in the first quarter, with total streaming hours increasing by 49% year-over-year to 13.2 billion hours.
In advance of May 7 earnings, the company guided revenue for the quarter to be $307 million to $317 million, which beats Wall Street’s estimate of $300.44 million.
The company is also expecting gross profit from $139 million to $144 million, and a net loss of $60 million to $55 million. Adjusted EBITDA was set at -$23 million to -$18 million.
The company withdrew its 2020 guidance amid coronavirus uncertainty, which CEO Anthony Wood addressed:
We have been working closely with advertisers to help update their plans to reflect new viewing patterns and adjust their overall marketing mix which has been affected by social distancing. While we expect some marketers to pause or reduce ad investments in the near term, we believe that the targeted and measurable TV ads and unique sponsorship capabilities that Roku offers are highly beneficial to brands today.
Roku stock rose 10% on the update.
The Outlook for Roku
While Roku may see some challenges with advertisers in the near-term, the reality of advertising is that as long as you have an audience, you’ll have an attractive platform for ad buys. Roku is doing its part with its customer growth and increase in streaming hours.
That should help the company advance toward its goal of profitability. Roku says it had $587 million in cash, cash equivalents, or short-term investments at the end of the first quarter, including drawing down $70 million from a revolving credit facility.
As social distancing guidelines stretch into the second quarter, you can expect Roku to continue its growth path – a rare gift to investors considering the state of the economy these days.
Finally, don’t forget that Roku’s stock price is hardly in untested waters. If Roku can challenge $160 again, that’s 30% upside in ROKU stock.
The Bottom Line on Roku
I’ve been a ROKU bull for a while now and that’s not going to change any time soon. Overall, my Portfolio Grader ranks Roku stock with a solid “B” grade.
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.