ROKU situation …

[stephenson]

So, bought ROKU at around 42 … December 2018.

I would normally have taken half off the table by now, but between the huge tax bill and the likelihood of continuing growth I find myself stuck.

What do you all think about the company and future growth and/or stability?

 

[Montecfo]

I own it. holding and wish I had more. no plans to sell.

 

[RonBoyd]

https://www.tipranks.com/stocks/roku/forecast



https://simplywall.st/stocks/us/media/nasdaq-roku/roku#summary



We perform automated risk checks on every company. We flag any failed checks as potential investment risks. A company which passes all our checks, however, is not 'risk free'.

Roku (ROKU) Risk Checks

Fail
Has there been substantial insider selling in the past 3 months?

Significant insider selling over the past 3 months
Section 9.1
Fail
Have shareholders been diluted over the past year?

Shareholders have been diluted in the past year
Section 9.3
Pass
Are they forecast to achieve profitability?

The company is currently profitable
Section 5.1
Pass
Are revenue and earnings forecast to grow?

Earnings are forecast to grow by an average of 51.7% per year for the next 3 years
Section 4.1
Pass
Are they in a good financial position?

Debt level is low and not considered a risk
Section 6.2
Pass
Is their dividend sustainable?

They do not pay a dividend
Section 7.0
Pass
Is their share price liquid and stable?

Share price has been stable over the past 3 months
Section 2.1
Pass
Do they have high quality earnings?

The company’s earnings are high quality
Section 5.1
Pass
Have profit margins improved over the past year?

Profit margins improved or ROKU became profitable
Section 5.1
Pass
Do they have sufficient financial data available?

They have sufficient analyst coverage
Section 4.0
Pass
Are there any concerning recent events?

No concerning events detected
Section 2.1
Pass
Do they have meaningful levels of revenue?

Revenue is meaningful ($2B)
Section 5.1
Pass
Do they have a meaningful market capitalization?

Market cap is meaningful ($63B)
Section 10.0
Pass
Do they have negative shareholders equity?

ROKU does not have negative shareholders equity.
Section 6.2

 

[finnski1]

So, bought ROKU at around 42 … December 2018.

I would normally have taken half off the table by now, but between the huge tax bill and the likelihood of continuing growth I find myself stuck.

What do you all think about the company and future growth and/or stability?

Well since it is a huge 11 bagger since you bought, if it were me I would simply sell about 25-30% of it. Enough to cover the tax hit and net a 2 or 3x return. Lock in an automatic 200% gain and still have the majority left to let ride. But that's just me. That's irrespective of future growth or stability. You can still participate in most of that if it happens and guarantee no disasters.

 

[target2019]

Sell 1 share each month to pay internet, phone, etc.?

 

[Montecfo]

To the OP: is this a significant chunk of your net worth?

I personally would not look to sell just because of gains. I simply re-evaluate and see if it still meets my criteria.

but if it got up to 5-10 percent of total equity I would consider trimming solely for that reason.

If you do charitable gifting ok would consider using appreciated stock as a way to save tax and mitigate risk.

 

[RonBoyd]

to the op: Is this a significant chunk of your net worth?

I personally would not look to sell just because of gains. I simply re-evaluate and see if it still meets my criteria.

But if it got up to 5-10 percent of total equity i would consider trimming solely for that reason.

If you do charitable gifting ok would consider using appreciated stock as a way to save tax and mitigate risk.

 

[Running_Man]

Sell a covered call, you can sell a July 30 500 call for $685 per 100 shares, a little over 1 percent for a week. This would represent 12% of your original purchase and take advantage of the high vix and surge in the stock price. Stock would need to go up 5% in a week for you to lose the stock but you would make the 5%.

Or sell a July 30 480 call for $1,250 and get back 25% of your money and 3% of the stock price for a one week term. Would risk selling at $492 equivalent.

It had a nice day on Friday, here's a chance to take advantage of that.

 

[stephenson]

Montecfo,

ROKU stock us about 15% of total portfolio, and about 30% of taxable - neither includes real estate.

I don’t need the profit, and it’s been a fun ride.

I am pretty bullish on the company’s prospects.

 

[Blue531]

Unless I found an even better investment or needed the money, I would not consider selling an investment that was doing well and that I believed in over the long term.

It appears that Roku has already gone up by over 20x since IPO in 2017. Could turn out to be a 100 bagger eventually. I'm a believer in letting the winners run.

Barchart has 16 of 20 analysts calling it a strong buy, if you go by that sort of thing. The last two quarters had earnings surprises of +550% and a +1,080% and the revenue shows consistent growth.

Makes me wish I had gotten in on this company when it first came out and I heard so many people at work talking about using the product. I got 4x my money when I bought Planet Fitness that way.

 

[Running_Man]

Does ROKU have growth prospects? Yes, it is one of the type of stocks that is selling on the basis of rapid sales growth that will eventually be turned into earnings, since at the present time ROKU has never earned a penny and presently sells for 30 times revenues.

It is funding this growth by issuing shares at higher and higher prices, very similar to the TESLA & AMC model. A million shares at 500 means the company can get about 500 million in cash without debt by issuing equity, as the shares rise issuing equity means more and more money for the company. This is the new stock market model where high stock price, no earnings and capital raises mean huge amounts of cash for companies.

ROKU had sales revenue of 1.7 Billion in 2020 and raised 2 billion by selling shares in 2 years, so I think ROKU is basically a stock selling entity. TO put in perspective it's initial offering of 10 million shares garnered 140 million dollars with sales of 323 million, now the company is valued at 60 billion dollars with sales of 2.2 billion. IT uses the money to make deals with big media companies to create streaming companies that provide content for ROKU that allows it to have customer growth as people add ROKU which allows for further stock sales.

If it could double from here it's stock price from here it will crack into the 100 most valuable companies in the world. If in the S&P500 it would be around #100 right now.

This is an interesting new model, where instead of a company paying dividends, investors reduce their ownership each year by about 3% in exchange for bringing in new owners who add money to the company at higher and higher prices.

 

[target2019]

I might buy it during the next crash.
https://www.investors.com/news/technology/roku-stock-buy-now/

If I can remember...

 

[Montecfo]

Does ROKU have growth prospects? Yes, it is one of the type of stocks that is selling on the basis of rapid sales growth that will eventually be turned into earnings, since at the present time ROKU has never earned a penny and presently sells for 30 times revenues.

It is funding this growth by issuing shares at higher and higher prices, very similar to the TESLA & AMC model. A million shares at 500 means the company can get about 500 million in cash without debt by issuing equity, as the shares rise issuing equity means more and more money for the company. This is the new stock market model where high stock price, no earnings and capital raises mean huge amounts of cash for companies.

ROKU had sales revenue of 1.7 Billion in 2020 and raised 2 billion by selling shares in 2 years, so I think ROKU is basically a stock selling entity. TO put in perspective it's initial offering of 10 million shares garnered 140 million dollars with sales of 323 million, now the company is valued at 60 billion dollars with sales of 2.2 billion. IT uses the money to make deals with big media companies to create streaming companies that provide content for ROKU that allows it to have customer growth as people add ROKU which allows for further stock sales.

If it could double from here it's stock price from here it will crack into the 100 most valuable companies in the world. If in the S&P500 it would be around #100 right now.

This is an interesting new model, where instead of a company paying dividends, investors reduce their ownership each year by about 3% in exchange for bringing in new owners who add money to the company at higher and higher prices.

I don't disagree it is expensive. But it is not like we have not seen rapid sales growth without earnings before. And stock offerings by growth companies are not new.

Trouble is these rapid growers tend to always seem "expensive" until they become mature companies and no longer have the early growth prospects.

I did not buy GOOG in its IPO in 2004 at $42.50 (post the 2014 split). Seemed too expensive. But I own a bunch now. I never owned Amazon for years. Too expensive. No profits! But they are a growth beast. I own a lot now.

Reading the tea leaves is tough as it is an effort to separate the deservingly expensive from the money pit.

To this point I find Roku deserving. But I watch carefully and could change my mind. I appreciate your analysis. I assume you are not short the stock?

 

[Running_Man]

No I am not short the stock. ROKU gains has been nearly 5% of the total market gains. I was considering buying today and immediately selling covered calls since they are paying 2% in a week. If I could time them right in 26 weeks I'd own the stock for free!

 

[triangle]

Is ARK Invest still buying or are they reducing their position. I do not know the answer but remember seeing a headline where they were reducing their position in Roku. They could be a market maker in the stock.

I have been a long time user of Roku, been through a number of dongles and now have a Roku powered TCL television. But I never once considered them worthy of an investment look (shows how much I know about their business), as there could be little profit in those hardware dongles and the software was simplistic.....and I always assumed the context providers would win-out over the past 10 years and control the streaming. I can see how Roku could monetize tracking what I watch on my TCL tv (though that may only go so far...for example it is not clear if they are also track what youtube videos I have watched inside the youtube app), but it would seem to be very little monetization compared to the FANG cohort. Even though there is a lot to like about my TCL tv, overall I do not like the user interface, not sure how much of that is driven by TCL or Roku, but if I were buying another TV I would definitely be checking out the competition and gladly give up my Roku device. In that regard I still would not consider the $ROKU stock.

 

[stephenson]

triangle,

ROKU’s business is a bit different than your summary. Most of their business is ad and content. Quick summary from finance.com:

Roku, Inc., together with its subsidiaries, operates a TV streaming platform. The company operates in two segments, Platform and Player. Its platform allows users to discover and access various movies and TV episodes, as well as live sports, music, news, and others. As of December 31, 2020, the company had 51.2 million active accounts. It also provides digital and video advertising, content distribution, subscription, and billing services, as well as other commerce transactions, brand sponsorship and promotions, and audience development campaigns; and manufactures, sells, and licenses smart TVs under the Roku TV name. In addition, the company offers streaming players, and audio products and accessories under the Roku brand name; and sells branded channel buttons on remote controls. It provides its products and services through retailers and distributors, as well as directly to customers through its website in the United States, Canada, the United Kingdom, France, the Republic of Ireland, Mexico, Brazil, and other Latin American countries. Roku, Inc. was founded in 2002 and is headquartered in San Jose, California.

 

[triangle]

triangle,

ROKU’s business is a bit different than your summary. Most of their business is ad and content. Quick summary from finance.com:

Roku, Inc., together with its subsidiaries, operates a TV streaming platform. The company operates in two segments, Platform and Player. Its platform allows users to discover and access various movies and TV episodes, as well as live sports, music, news, and others. As of December 31, 2020, the company had 51.2 million active accounts. It also provides digital and video advertising, content distribution, subscription, and billing services, as well as other commerce transactions, brand sponsorship and promotions, and audience development campaigns; and manufactures, sells, and licenses smart TVs under the Roku TV name. In addition, the company offers streaming players, and audio products and accessories under the Roku brand name; and sells branded channel buttons on remote controls. It provides its products and services through retailers and distributors, as well as directly to customers through its website in the United States, Canada, the United Kingdom, France, the Republic of Ireland, Mexico, Brazil, and other Latin American countries. Roku, Inc. was founded in 2002 and is headquartered in San Jose, California.

Thanks for the feedback. I understand that, but only to a point. I have been a Roku device user for 8-10 years and see one sidebar advertisement when I select the home button, but after that point I am usually inside some app (e.g YouTube, PBS, MovieSubscriptionChannel, or OTA television) and interface with Roku proper very little. I find it surprising that they can make so much profit (promise of future profits) by charging for the dedicated buttons on the remote, the side bar ads to highlight some upcoming channel/event, and by sniffing what OTA channel or app is active. I may be wrong but I did not think they were hosting content for the likes of PBS, Acorn, Hulu, etc. but mostly providing a software control layer for the hardware which decodes the video streams. I was under the impression they helped subsidize the price of my TCL TV, which they could do by charging providers for one of the dedicated channel buttons. I am curious how much they can monetize my occasional viewing PBS or sports/news on OTA TV or from using the Youtube app. I never watch any of their streaming channels that are integrated/appended to the end of the OTA channel list as the remote is too cumbersome to use. But that is my anecdotal experience, and does not reflect how others may use their service.

 

[stephenson]

Here’s a more thorough monetization summary - complicated, but seems like their hardware biz is break even to get folks streaming with an agnostic device/system, but profit are from ads, content and connecting the dots between streamers and content providers.

https://developer.roku.com/en-gb/docs/features/monetization/monetization-overview.md

 

[Qs Laptop]

So, bought ROKU at around 42 … December 2018.

I would normally have taken half off the table by now, but between the huge tax bill and the likelihood of continuing growth I find myself stuck.

What do you all think about the company and future growth and/or stability?

I got in at $113. I understand your problem.

I am holding long term. Streaming services are only going to grow and ROKU has the best method for accessing these services. Their advertising business is a beast that is just being awakened.

 

[RonBoyd]

Streaming services are only going to grow and ROKU has the best method for accessing these services.

Not strictly true (but nevertheless a valid point).

We watch a lot of TV and we utilize Fire TV Cube much more than our ROKU Ultra as our gateway device -- maybe 80/20. There are few Apps that are not included in both devices -- PlayOn being a notable exception (and the main reason the ROKU device isn't simply gathering dust).

Oh! The TV in the kitchen has only ROKU Ultra and nVidia Shield devices attached. The TV is used mostly for OTA but also for streaming FS1 & FS2 (Sling). The Shield is the device of choice... but only because of better (IMHO) display of Closed Captioning (all other things being equal).

The RV has both ROKU Ultra and nVidia Shield.

 

[Qs Laptop]

Not strictly true (but nevertheless a valid point).

We watch a lot of TV and we utilize Fire TV Cube much more than our ROKU Ultra as our gateway device -- maybe 80/20. There are few Apps that are not included in both devices -- PlayOn being a notable exception (and the main reason the ROKU device isn't simply gathering dust).

Oh! The TV in the kitchen has only ROKU Ultra and nVidia Shield devices attached. The TV is used mostly for OTA but also for streaming FS1 & FS2 (Sling). The Shield is the device of choice... but only because of better (IMHO) display of Closed Captioning (all other things being equal).

The RV has both ROKU Ultra and nVidia Shield.

Fair point. I've only used ROKU as built into my TV. I find it fast with no downtime. I love the vocal search feature. I have a friend that has both ROKU dongle and Fire TV dongle and he says they perform the same, though he prefers the Fire TV because he's into the Amazon Alexa environment.

I can say that TV's with built-in apps are clunky and slow and can't imagine going back to that.