Shares of Roku fell more than 20% after Comcast announced it’s giving away a free streaming device.
What goes up must come down. Roku stock has been on a roll this year and its shares are up more than 300% year to date. This is why it was a surprise to many people when the company’s stock plummeted on Wednesday.
The stock fell after Comcast announced it would give away a free streaming device to its online-only subscribers. Then Facebook announced it is launching a tool that can stream content.
Roku investors did not react favorably to the news that the company may have to deal with increased competition in the coming months. The company’s shares dropped more than 20% by the end of the day.
The Streaming Wars Continue
This year, streaming services seem to have become the new battleground. Netflix has taken the biggest hit, with investors becoming concerned that the company can’t compete with new services offered by Disney and Apple.
This week, it was Roku’s turn, and on Wednesday, the company got hit by the perfect news storm. First, Comcast announced it would offer a free streaming TV box called the Xfinity Flex to its internet-only subscribers.
The Xfinity Flex originally cost $5 a month. This connected streaming device provides content from Netflix and Amazon Prime, making it a direct competitor of Roku. And the day before, Comcast had announced it is launching its own streaming service called Peacock.
Then Facebook announced it’s launching Portal TV, a device that connects to a user’s TV. The device comes with a microphone and camera and allows users to make video calls and stream content. Facebook plans to release the device on Nov. 5.
Should Roku Investors be Worried?
Comcast does pose a slight risk to Roku but the effect will likely be minimal. Roku is just too popular and it’s already used on over 41 million devices in the U.S. It seems very unlikely that many Roku customers will switch to Comcast just to save $5 a month.
Comcast doesn’t have the same following Roku does and a free streaming device won’t get them there. And let’s not forget, even after the shares dropped Roku is still up 323% this year.