Market Overview

Roku Vs. Netflix: Needham's Laura Martin Sees A Clear Quarantine Winner

Roku Vs. Netflix: Needham's Laura Martin Sees A Clear Quarantine Winner

Some so-called “stay-at-home” stocks have performed relatively well in recent weeks during the broad market downturn.

On Monday, one analyst discussed a stay-at-home battle playing out between Netflix Inc (NASDAQ: NFLX) and Roku Inc (NASDAQ: ROKU).

Needham's Laura Martin reiterated her Buy rating and $200 for Roku and her Underperform rating for Netflix.

Benzinga is covering every angle of how the coronavirus affects the financial world. For daily updates, sign up for our coronavirus newsletter.

The Thesis

Martin said there are at least three reasons she likes Roku more than Netflix.

  1. She said Roku is a better value trading at 6.2 times enterprise value/revenue compared to 7.8 times for Netflix.
  2. She said Roku’s balance sheet is superior to Netflix’s in a time of uncertainty in the credit markets. Roku has $100 million in debt, $500 million in cash and annual EBITDA of at least $32 million in each of the past two years. Netflix has $15 billion in debt, $5 billion in cash and Needham is projecting between $2 billion and $4 billion in negative free cash flow in 2020.
  3. Finally, Martin said Roku is benefitting much more than Netflix from the coronavirus quarantine. Quarantined Americans are certainly using both services from home. However, Roku’s advertising-based model is benefitting from usage increases, while Netflix’s subscription-based model is not tied to viewing hours.

“Although hours streamed are growing during COVID-19, we prefer Roku, which has a volume-based revenue model (ie, advertising CPMs) based on viewing time rather than NFLX, which charges the same price regardless of hours viewed,” Martin wrote in a note.

Benzinga’s Take

For Netflix to benefit from the quarantine, it would need the outbreak to drive subscription growth rather than additional viewing hours from existing subscribers. Given the financial uncertainty in the U.S. at the moment, many Americans may be hesitant to add on another paid subscription service, even if it costs just $12.99 per month.

Do you agree with this take? Email with your thoughts.

Related Links:

4 'Stay-At-Home' Stocks That Are Soaring Thanks To Social Distancing

Where Does The Market Go From Here? Keep An Eye On This Crucial S&P 500 Level

Photo courtesy of Roku.

Latest Ratings for NFLX

May 2020CitigroupMaintainsNeutral
May 2020JefferiesInitiates Coverage OnBuy
Apr 2020SunTrust Robinson HumphreyMaintainsBuy

View More Analyst Ratings for NFLX
View the Latest Analyst Ratings


Related Articles (NFLX + ROKU)

View Comments and Join the Discussion!

Posted-In: Analyst Color Long Ideas Price Target Reiteration Top Stories Analyst Ratings Tech Trading Ideas Best of Benzinga

Latest Ratings

KMXJP MorganInitiates Coverage On105.0
INGNSVB LeerinkMaintains42.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at