Summary: OVERPRICED
Score: 7/20
MOS: 24%
Share Price: $155
Sticker Price: $206
Is Roku a good buy?
As quoted by Networkworld.com, “Roku is the best darn single internet TV device available today.”
For those of you who don’t know what a Roku is, it’s a device that provides access to 1,800 channels. Some of which are free including Youtube, Pandora, PBS, PBS Kids, Hasbro, Crackle, VEVO, and many more. If you want more channels, you’ll have to subscribe to those cable networks individually. Roku is also a device that keeps all your subscription platforms (Netflix, HBO, Disney+, Hulu, Amazon, etc) in one location. You still have to subscribe to those platforms individuals but the Roku will keep them organized in one place.
Roku is NOT a subscription business model. Roku sells devices that range between $24.99 and $99.99 (One-time purchase). In other words, Roku is a hardware business model.
This is a problem from an investment standpoint.
Recurring revenue business models are where you should turn your attention. Hardware business models alone need to continuously innovate to motivate customers to upgrade. Apple is a perfect example of this as they do this very well. In the case of Roku, once you buy a Roku, you probably won’t have to upgrade for years if ever.
Roku also competes with Smart TVs which essentially do the same thing, they offer access to free channels, Crackle being one of the most common. You also can see all your subscription platforms on one organized screen.
Although their revenues have increased over the last year, they still are considered OVERPRICED. The score of 7/20 shows the financials are too weak. Although they are at a 24% MOS (Margin of Safety) they aren’t at the ideal MOS of 50%.
Maybe put Roku on your watchlist. If they can figure out a way to create a subscription business model or perhaps acquire a subscription business model, they may be worth a closer look.
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