Roku has changed the way we stream television. Attaching a Roku device to your TV gives you instant access to services such as Netflix, Hulu, Amazon Prime and other subscription outlets. It turns any TV into a “smart” television. But with so many TVs offering a similar built-in streaming service and many video game consoles allowing access to the same entertainment, is Roku still relevant? Has advancing streaming technology affected Roku’s stock value?
How to Invest in Roku
For people looking to cut back on cable costs, Roku is still a popular choice. In fact, Roku ended the December quarter in 2019 with 36.9 million active user accounts, up 4.6 million from the prior quarter. Its user base grew 36% year over year and the average revenue per customer went up, too.
Want in on the action? There are 2 ways you can invest in Roku today.
You can invest in Roku without signing up with an online broker. To do so, you’ll have to opt in a direct stock plan or dividend reinvestment plan, both available directly from the company. A direct stock plan allows smaller investors to buy ownership directly from Roku simply by transferring money to the company. The other option is dividend reinvestment plans, which allow Roku to automatically buy more stocks for you each quarter (4 times per year), usually free of charge.
Check out our complete guide on buying stocks directly here.
New investors who aren’t as stock market savvy may want to go with a broker. An online broker facilitates the stock purchase for you while offering a variety of services and information on their website or app.
Once you pick a broker, you’ll need to open an account. This often requires entering some personal information and proof of funds, like a W-2 form or bank statement. You’ll also need to specify how you want to fund your stock purchases.
While brokers provide a more secure option for new investors and convenient services, that obviously comes with a price. Most brokers have a variety of brokerage fees for their services, including accounting fees, and some also take a little commission. But every broker is different, so do your research. At Benzinga, we can help you pick the broker that makes the most sense for you.
- Best For:Active and Global TradersSecurely through Interactive Brokers’ website
- Best For:Traders of All Levelssecurely through Moomoo's website
- Best For:Mobile Userssecurely through Plus500's website
- Best For:Momentum traderssecurely through Centerpoint Securities's website
- Best For:Intermediate Traders and Investorssecurely through Webull's app
Pros to Buying Roku Stock
Roku may not be the unique product it once was, but it’s still a popular choice for many people looking to break away from monthly cable bills. As we mentioned previously, Roku is gaining a lot of new customers because of their abundant 3rd-party streaming service options.
And there’s more streaming services than ever before, making Roku quite appealing to people ditching cable. Disney+ and Apple TV+ were big hits at their releases and there’s more on the way, including HBO Max and Comcast’s Peacock. Having all of these services on 1 device — that can be transferred from room to room, device to device — is definitely appealing.
“Overall, we're excited about the launch of all the new services coming to the industry and to our platform. We think that they are good for Roku in a bunch of ways," said CEO Anthony Wood in Roku's 3rd-quarter earnings call. "Engagement on our platform is very good for us. They're going to increase the interest in viewership moving from traditional TV to streaming. We think that eventually all TV is going to be streamed and that this will be the rise of these new services."
Roku has not only been gaining customers but having a lot of success on the stock market, too. Last year, Roku’s stock delivered a 260% return. The stock jumped 45% in October 2019 alone.
Cons to Buying Roku Stock
While Roku has been gaining customers and 3rd-party streaming services, the company itself is not profitable. The company reports negative earnings more often than not and its free cash flows hover around the break-even point each quarter. Roku is not expected to become sustainable until 2021. This fact alone keeps investors away.
Another concern is Roku’s stiff competition. Roku isn’t the only device offering ad-supported video streaming to people sick of paying cable bills, as mentioned a bit earlier. Amazon offers a similar device, the Amazon Fire TV Stick. Amazon also offers TVs with streaming services included, similar to a Roku TV set. Then there’s Apple TV products. Microsoft’s Xbox and Sony’s Playstation are other big competitors since gamers already have all the streaming services on their consoles without having to plug in another device.
History of Roku’s Stock Price
Roku: Risks and Rewards
At the moment, Roku is seen as a mildly risky investment that may lead to some exciting rewards in a few years if the company becomes profitable. Before that happens, Roku remains less than ideal for investors looking for a more stable company to buy stocks in.
But if you’re willing to take a small gamble, Roku is in the popular internet TV and streaming sector that’s going to grow each year. The question is: Will Roku be a part of that growth or will its competition leave it in a dusty bin in your closet?