Roku: Overvalued And Incredible Insider Selling Pressure Awaits
Roku: Overvalued And Incredible Insider Selling Pressure Awaits
Yesterday, I watched Mike Kramer's Idea of the Month on Cheddar TV. I agree with his bearish thesis.
Incidentally, on Market Adventures, I highlighted ROKU, on January 10th, as a possible short. Shares were trading at $45 then.
Post the 180 day IPO lockup, there are 84 million Series B shares owned by insiders and private equity with a weighted average cost of $2.55.
This idea was discussed in more depth with members of my private investing community, Market Adventures.
Yesterday, I watched fellow Marketplace Author (Mott Capital), Mike Kramer's Idea of the Month, to sell (short) Roku Inc. (ROKU). I agree with Mike's bearish read on the fundamentals and its stretched valuation. Incidentally, on January 10th, on Market Adventures, I highlighted ROKU as a possible short, as well as another company (which I will not share on the free site).
Let's start with valuation. ROKU is trading at 6.5X sales. Consensus estimates are only calling for 30% revenue growth and despite this growth, ROKU is projected to have negative net income in FY 2018.
Source: Yahoo Finance
The company has only had one public earnings release and the company had a loss from operations of $29.1 million for the nine months ended September 30, 2017. On a year over year basis, for the nine month period, ROKU grew revenue 29.1%, or by $73 million, yet its loss from operations only improved by $17.6 million. So at what revenue number does this business profitably scale?
From valuation standpoint, it is really hard to consider a market capitalization of $4.3 billion for a company projected to lose money in FY 2018. Is this stock trading based on FY 2020 estimates?
Yesterday, I watched Mike Kramer's Idea of the Month on Cheddar TV. I agree with his bearish thesis.
Incidentally, on Market Adventures, I highlighted ROKU, on January 10th, as a possible short. Shares were trading at $45 then.
Post the 180 day IPO lockup, there are 84 million Series B shares owned by insiders and private equity with a weighted average cost of $2.55.
This idea was discussed in more depth with members of my private investing community, Market Adventures.
Yesterday, I watched fellow Marketplace Author (Mott Capital), Mike Kramer's Idea of the Month, to sell (short) Roku Inc. (ROKU). I agree with Mike's bearish read on the fundamentals and its stretched valuation. Incidentally, on January 10th, on Market Adventures, I highlighted ROKU as a possible short, as well as another company (which I will not share on the free site).
Let's start with valuation. ROKU is trading at 6.5X sales. Consensus estimates are only calling for 30% revenue growth and despite this growth, ROKU is projected to have negative net income in FY 2018.
Source: Yahoo Finance
The company has only had one public earnings release and the company had a loss from operations of $29.1 million for the nine months ended September 30, 2017. On a year over year basis, for the nine month period, ROKU grew revenue 29.1%, or by $73 million, yet its loss from operations only improved by $17.6 million. So at what revenue number does this business profitably scale?
From valuation standpoint, it is really hard to consider a market capitalization of $4.3 billion for a company projected to lose money in FY 2018. Is this stock trading based on FY 2020 estimates?
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