Roku manufacturers and produces a media player for digital streaming as well as an advertising platform for connected TVs.
RokuDecember 06, 2020
Thesis - Roku is a leading streaming platform. Roku manufactures and sells media players that allow customers to connect their TVs to a range of streaming providers. Customers can easily switch between subscription services like Netflix, Amazon Video, HBO, Disney+ and a number of ad-supported content providers. They offer an advertising platform, so that these services can push their latest shows and brands can reach consumers. Online streaming continues to be a mega trend, which the Coronavirus pandemic has accelerated further. Roku’s strategy is to remain an agnostic platform, supporting all of the individual content providers and benefits from the increased streaming numbers no matter which individual brand or show is performing best. Think of Roku as the operating system for the TV, where content creators, advertisers and customers are the key steak holders. So far they have done a great job at pleasing all three.
Leadership - Roku’s co-founder and CEO is Anthony Wood. Wood has started several companies, one of which was ReplayTV - one of the first digital recorders that allowed customers to record and re-watch shows. From there, he joined Netflix to work on an internal project that put streaming players in people’s homes. Reed Hastings decided that the project could damage their relationships with content providers, so the product was spun out into a separate company, that became Roku.
Financials & Performance - Roku has 46m active accounts, adding 2.9m in the last reported quarter. Revenue grew 73% year over year, an acceleration from the previous quarters growth of an already impressive 50%. The average revenue per user is also increasing over time, now at $27, up from $22.58 a year before. Whilst Roku was profitable in the last quarter, it generally invests in continued expansion.
Risks - Streaming is a hot market and other devices do exist. Roku’s agnostic positioning gives it an advantage over say the Amazon TV stick. Roku could be at risk if the content players stop licensing shows through the platform, but given their popularity with end customers, they seem well positioned.