The Risk And Upside In Roku: Here Come The Bumps

An underpriced IPO created both a stock spike and now huge short interest.
ROKU is a platform company, not a hardware company, and that business is looking very good.
Valuation calls are pouring in as price targets are hiked - there is a bullish thesis, but the stock rose quickly.
https://www.servicedonline.com/
By Ophir Gottlieb

Preface

Roku Inc. (ROKU) is a Spotlight Top Pick, one of the riskiest we have in the portfolio, and a wave of downgrades has pushed the stock lower. Let's review the downgrades, the bullish thesis, and what may be coming for the stock.

Story

ROKU was added as Spotlight Top Pick on 11-28-2017 for $47, and as of this writing, it is trading at $46.28 after rising to over $58. The company, already, has a bizarre history as a public company, even though it just IPO'd on 28 Sept. 2017.
The IPO price was set far too low - this is a trick the large banks do to enrich their wealthiest clients and steal money from unwitting founders.
The company [read "the banks"] priced its 18 million share offering at $14 per share, and on the very first day, it rose 67%. That means the founder shares that were sold in that IPO were set too low, while the bank's clients that bought in for $14 made a killing.
As of today, we're looking at a $46 price - yet more evidence of a wildly underpriced offering.
Now, it's of no real consequence to us as investors except for one stark reality - when a stock is underpriced so wildly at IPO, a wave of buying comes in, which inevitably leads to a wave of short selling and that's exactly what we see with ROKU right now.
ROKU's short interest started at 4.1 million shares on 10-13-2017 and rose all the way up to 7.7 million shares by 11-30-2017. Here is a little table from

sourec : https://seekingalpha.com/article/4136230-risk-upside-roku-come-bumps

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