Roku: An Overhyped Tech Stock Set To Suffer The Same Fate As Snap
After its IPO at $14 per share on 9/28/17, ROKU experienced a buying frenzy that sent share price up to nearly $30.
Since reaching its all time high on 9/29/17, ROKU has generally trended downward as investors realized the stock was overvalued.
ROKU is currently unprofitable, and significant competition from industry giants such as AAPL, AMZN, and GOOG makes a path to eventual profitability all but impossible.
On September 28, ROKU (NASDAQ: ROKU) finally had its IPO. Aping the trend of many overvalued tech IPOs, the stock price rocketed up before gradually beginning a return to more realistic levels. However, ROKU has yet to report a profit, giving investors serious cause for concern. Unlike the ever-disruptive AMZN (NASDAQ: AMZN), which has sold investors on its ability to potentially dominate several markets in the long term, ROKU has no clear path to profitability. As such, it is very difficult to justify ROKU's current share price and market cap of $20.38 and $1.98 billion, respectively.
Revenue Streams
Roku has two main sources of revenue: player revenue (sales of its hardware) and platform revenue (sales of advertising and other services). Player revenue has historically been ROKU's dominant revenue stream; however, given the very low margins earned by ROKU on its player revenue, the company has started an effort to shift the bulk of its revenue to platform revenue.
Source: TechCrunch
As of ROKU's most recent SEC filing, platform revenue made up nearly 50% of total revenue. This shift away from hardware sales is in order to take advantage of the much higher margins which ROKU receives on its platform revenue; as the chart below shows, the difference in margins between two revenue streams is enormous.
Since reaching its all time high on 9/29/17, ROKU has generally trended downward as investors realized the stock was overvalued.
ROKU is currently unprofitable, and significant competition from industry giants such as AAPL, AMZN, and GOOG makes a path to eventual profitability all but impossible.
On September 28, ROKU (NASDAQ: ROKU) finally had its IPO. Aping the trend of many overvalued tech IPOs, the stock price rocketed up before gradually beginning a return to more realistic levels. However, ROKU has yet to report a profit, giving investors serious cause for concern. Unlike the ever-disruptive AMZN (NASDAQ: AMZN), which has sold investors on its ability to potentially dominate several markets in the long term, ROKU has no clear path to profitability. As such, it is very difficult to justify ROKU's current share price and market cap of $20.38 and $1.98 billion, respectively.
Revenue Streams
Roku has two main sources of revenue: player revenue (sales of its hardware) and platform revenue (sales of advertising and other services). Player revenue has historically been ROKU's dominant revenue stream; however, given the very low margins earned by ROKU on its player revenue, the company has started an effort to shift the bulk of its revenue to platform revenue.
Source: TechCrunch
As of ROKU's most recent SEC filing, platform revenue made up nearly 50% of total revenue. This shift away from hardware sales is in order to take advantage of the much higher margins which ROKU receives on its platform revenue; as the chart below shows, the difference in margins between two revenue streams is enormous.
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