Roku’s Stock Soared 366% in 2019

The stock continues to do well thanks to its strong subscriber base and ad-supported content.

There are few stocks that nearly all analysts can get excited about but Roku is one such stock. The company’s shares are up an astounding 366% year to date and many agree that right now, Roku is a major player in the streaming war.

According to a William Blair analyst, Roku is expanding faster than Netflix did. Analyst Ralph Schackart said that the stages Roku will go through in its international expansion will be similar to what Netflix went through when it expanded internationally.

Schackart said he anticipates Roku will reach 80 million active accounts by 2025. William Blair held its outperform rating on the stock and $145 price target. 

But given the company’s high valuation, is now really the time to invest in Roku? Should new investors hold off until the price drops a little? Here are three things you should know before investing in Roku.

Roku continues to exceed revenue expectations

Investors are excited about Roku because the company continues to exceed revenue expectations. The company’s latest earnings report showed that revenue increased 59% year over year. 

And the company continues to increase its profitability. Roku’s EBITDA reached $11.1 million, up from $7.1 million a year earlier. 

Roku won’t struggle with competition the way Netflix will

Shares of Netflix have been up and down over the past year thanks to increased competition in the streaming market. According to the Financial Times, Apple spent $6 billion on original content for its new streaming service. The streaming market will continue to widen and it will be harder for companies to stay competitive. 

Roku does have an advantage because it offers both hardware and software. So Roku offers its streaming service but it also hosts 5,000 other streaming services. And Roku devices currently own 44% of the market share, beating out companies like Apple and Amazon.

Roku is winning with its ad-supported content

Consumers continue to shift away from traditional television as streaming options continue to increase. And a huge revenue driver for Roku is the company’s ad-supported content. The company offers over 10,000 free movies and TV shows which are paid for by ads. 

This is a win for Roku customers and the businesses the company partners with. These businesses receive detailed data that allows them to advertise more effectively. And as the ad revenue increases, Roku can provide more free content to its subscribers. 

No stock goes up forever and Roku will have headwinds to deal with along the way. But if it can continue to increase its average revenue per subscriber, we can expect more good things from Roku in the future.