Roku Inc (ROKU) $98 – Nothing compelling about the company

Industry/Sector/Type – Streaming/connected TV

Biggest catalyst for the stock – Cord cutting, for those who don’t want a fire stick or prefer to not have their choices tracked.

There’s nothing compelling about the valuation and/or earnings/sales growth, especially in a market that has been fairly volatile for the past few months. Let’s wait for either better growth or a lower price.

Positives

Widest selection for ad supported content – ideal for those who don’t want to fork out a monthly subscription.

Provider agnostic and great search capabilities, also a better user experience than a smart TV.

Neutral and not owned or attached to any one provider like Amazon, giving customers complete control over their viewing choices.

It did beat earnings and guidance last quarter, and should meet forecasts in 2026.

Negatives

Very competitive area, and for many customers a Smart TV really does the job of selecting content. Paying $30-$100 for the device is a turn off, and a waste. I don’t need an extra gadget cluttering the area.

Its valuation is pretty high, and I don’t see much room for error for a stock quoting 47x earnings growing at 30%

Roku’s margins are also quite low, cash flow margin of only 10% is low, it needs to get more profitable to get a better multiple.

Stock Performance

1 Year 22% 5 Year -74% 10 Year – NA

Valuation

Three years forward.

P/S 2.63 Sales Growth 13% P/S Growth 0.16 – this is fairly low, and reflects competition and low margins.

P/E  47 Earnings Growth 30% PEG 1.65

Cash Flow Margin 10%

Operating Margin 4%

Either the stock grows a lot faster or the price needs to come down to buy it.