2024-04-15 14:24:39 ET
Summary
- My second coverage of Roku is a lot more optimistic than the first one but there is still work that needs to be done.
- The growth in numbers is accompanied by topline growth this time, but margins are still suffering.
- Sales and Marketing are still fueling the growth in a big way, but recent quarterly numbers are encouraging. It remains to be seen if this trend can continue.
- Valuation has improved tremendously, and it's trading close to its lowest values relative to its history.
- Lack of a timeline for actual profitability and an expectation of above-average expected growth means the company might trend sideways longer than most investors anticipate.
I covered Roku ( ROKU ) more than a year ago with a Strong Sell Rating. Some stocks do have a passionate following in the market and I knew Roku was one of them. But I was still surprised to see the reaction in the comments. I was told that I did not understand the grand vision of the business. Actual financials meant little as it was all about growth (Growth in subscriber numbers, not actual growth). But my thesis was simple....
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Roku: Popularity Does Not Mean Profitability