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Is Roku a buy?

It’s time to revisit a streaming name. Here is the breakdown on $ROKU, otherwise known as Roku.

Current Price: $356.54

52/Wk High: $486.72

52/Wk Low: $58.22

Market Cap: $45.8 Billion

Read below for the breakdown!

Roku ($ROKU) is a major TV streaming platform that provides customers with the platform and hardware to access a huge multitude of content.

Roku has become a company of focus given the massive rise in streaming amongst consumers. Taking a look at Roku’s recent performance, the stock has been on fire, moving over 260% to the upside in just the past year.

In recent news, Roku announced the acquisition of Nielsen’s advanced video advertising business which will, in turn, accelerate Roku’s end-to-end DAI solutions.

Digging into the numbers, Roku beat Q4 2020 expectations with an EPS of $0.49, much better than the analyst’s EPS consensus estimate of $-0.05. On a year over year basis EPS increased 476.92%.

Revenues increased significantly as well, with revenues totaling $649.9 million for the quarter representing a strong 58% increase in revenues on a year over year basis.

Breaking down revenues, platform revenues totaled $471.2 million (Up 81% YoY) while player revenues totaled $178.7 million representing an 18% player revenues jump on a year over year basis.

As for gross profit, Roku reported a Q4 gross profit of $305.5 million, representing a 89% gain on a year over year basis. Gross profit margin improved as well, jumping 770 basis points to 47%.

When it comes to expenses, total operating expenses totaled $240.3 million for the quarter, representing a 34% jump, but as everyone knows, it takes money to make money.

Income improved significantly as well, with total income from operations totaling $65.2 million, much better than the $-17.4 million throughout Q4 2019.

Rounding out Roku’s Q4 results, adjusted EBITDA totaled $113.5 million, representing a 650% increase over the same time 2019 adjusted EBITDA of $15.1 million.

Roku’s user base also expanded throughout Q4, with active accounts jumping 39% year over year to 51.2 million while streaming hours jumped 55% to 17 billion hours.

Finally, Roku’s average revenue per user increased by a strong 24% on a year-over-year basis to $28.75/user, a strong increase over the $23.14/user level from Q4 2019.

Taking a quick look at the full year, revenues totaled $1.778 billion for FY 2020, representing revenue growth of 58% throughout the year.

Furthermore, Roku added a strong 14.3 million active accounts throughout FY 2020 and ended the full year with a sizable 51.2 million active accounts.

Shifting into the balance sheet, the numbers are solid.

Total Debt: $95 Million

Total Liabilities: $943 Million

Total Assets: $2.271 Billion

Cash & Short Term Inv: $1.093 Billion

On a valuation basis, Roku does trade at a premium.

Forward Price to Earnings: 642.54x

Price to Sales: 26.55x

Price to Book: 34.66x

Price to Cash Flow: 150.14x

Management has been effective but could improve.

Return on Equity: -1.73%

Return on Assets: -0.94%

Return on Invested Capital: -1.22%

Given the numbers, the analysts are bullish with a mean price target of $480.10/share, representing a 34.66% gain.

The high price target is $600.00/share, representing a 68.28% gain, while the low price target is $275.00/share, representing a -22.87% loss.

The big money is quite involved as well, with 68.74% of Roku being owned by institutions. Top holders include Fidelity Management & Research, The Vanguard Group, and Ark Investment Management.

On a technical basis, Roku could be presenting opportunities. According to the six-month charts, the MACD is moving to the downside with significant momentum within a range of -8.17 down to -17.86.

The six-month charts are also indicating an RSI of 40.00 and CCI of -86.45, both of which are on the low end.

In short, Roku is a strong streaming play with consistently solid earnings growth, user growth, and an expanding streaming market to expand into for years to come.


Disclaimer: This is not direct financial advice, simply an opinion based on independent research.

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