Shots Fired: Comcast Takes Aim at Roku
Is there a bull case for Roku today?
After a sharp, sharp drop of 14% Wednesday the question is on a lot of traders’ minds today.
Roku is by far one of the best-performing stocks of the year. And it’s one of the most lucrative IPOs in recent memory. Roku shares are up over 340% from the Jan. 2. open at $29.82 to today’s intraday price of $131.50.
But some head winds are forming and as such I thought it wise to relay our in-house trading expert Greg Guenthner’s thoughts on Roku shares today.
Roku: A Technical Breakdown
Speaking to me earlier this morning, Greg noted:
“Comcast is handing out free streaming boxes called Xfinity Flex to customers who subscribe to the company’s internet-only plans. Free is a pretty good deal compared with nearly $30 for a Roku device…”
“Flex boxes function more or less like a Roku. However, there is a slight catch. Not only do additional Flex devices cost $5 a month to lease from Comcast, but the Flex will also serve as a way for Comcast to bombard users with offers to buy and rent movies.”
“I’d say this effort is Comcast’s latest attempt to get back into the wallets of cord-cutters. Either way, Roku investors appear to be concerned about Comcast moving onto their turf. Roku shares dropped nearly 14% following the Comcast announcement. The stock is now down more than 25% from its highs.”
Greg further explains:
“That’s an ugly slide in less than two weeks of trading for this once-powerful momentum darling. But let’s not write Roku’s obituary just yet. Even factoring in this most recent skid, the stock is still up nearly 337% year to date.”
The Bull Case Moving Forward
Greg’s analysis points to the idea that more gains could be in store for Roku owners. And perhaps the drop in share value over the past two weeks is a mix of market nervousness and profit taking.
From a trends side, sure, the streaming space (for both hardware and content) is a lot more competitive today than it was a few years ago.
But much like Greg noted when Roku IPO’d, the hardware side of Roku’s business model was solid, and we like the company’s ability to keep money coming in with new hardware offerings and integrated streaming technologies.
Take for instance Roku Audio. A little-known aspect of Roku’s hardware line. Yes, in addition to a Roku TV you now can outfit your entertainment center with Roku audio equipment.
Imagine a Roku sound bar that can function like an Amazon Alexa but also stream any and all video you ever wanted straight to your TV.
Additionally, Roku has quietly positioned itself as a streaming bundler, licensing its platform to other companies. This aspect of Roku’s business model flew well under the radar ahead of its IPO.
For example, earlier this month Roku announced a deal with Hisense U.K., which will now put Roku’s popular streaming platform in front of a huge TV-viewing populace.
And we’ve seen this platform licensing model work here in North America for Roku, so we like its chances to help Roku grow down the road as it continues to expand internationally.
And that’s the basic bull case for Roku today.
For Technology Profits Daily,
Chief Technology Expert, Technology Profits Daily