ROKU

What is Roku and what do they do?

Roku, Inc. connects people to the streaming content they love. And there's certainly a lot of it to organise. 

Via the Roku platform and its wide range of products (i.e. both software and hardware), Roku offers users access to popular streaming platforms such as Apple TV+, Netflix, Hulu, Prime Video, Disney+ and Spotify, while still offering free TV shows and access to local channels.

This TV streaming platform operator and maker of streaming devices are currently headquartered in San Jose, California. The company’s aim is to make it easy and affordable to watch your favourite movies and television shows by “connecting the entire TV ecosystem around the world.”

Roku currently distributes its players in various countries across North America, South America, and Europe. 

In FY2021, the company added over 8.9 million active accounts to end the year with a total of 60.1 million active accounts, a year-on-year increase of 17.4%.

How does Roku make money?

Roku earns revenue via two business segments, platform (81%) and player (19%).

Platform segment

Roku’s platform revenue comes from digital advertising sales, subscription and transaction revenue sharing, content distribution services, premium subscriptions to services such as Showtime, Stars and Cinemax, billing services, sale of Roku branded buttons on remote controls and licensing arrangements with TV brands and service operators.

Player segment

Most of Roku’s revenue for this segment comes from the sale of their hardware to brick-and-mortar retailers, online retailers and direct to consumers via their website.

Roku’s hardware includes streaming devices such as the Roku Express 4K+, Roku Ultra and Roku Streambar and audio devices such as Roku Wireless Speakers and the Roku Wireless Subwoofer.

Is Roku profitable?

Since going public in 2017, Roku’s profitability had always been in the red. But Roku finally became profitable during FY2021 with the company’s net income rising from minus US$18m up to US$242m.

Roku also has US$188m of free cash flow at this time.

Is ROKU a good buy?

Many investors are bullish on ROKU’s long-term prospects, as media consumption habits shift towards streaming video platforms and the company’s financials continue to trend upwards.

But Roku also warns they may be facing some short-term headwinds in the near future.

“For 2022, we expect ongoing supply chain disruptions will continue to impact the global economy. This will affect the broader consumer electronics space, and the TV industry in particular…TV unit sales remain below pre-Covid levels and delayed ad spend in verticals most impacted by supply/demand imbalances may continue into 2022.”

Who owns ROKU stock?

Holding 11.84% of Roku’s total shares, Founder, Chairman and CEO Anthony Wood is ROKU stock’s biggest owner. Trivia: Roku means “six” in Japanese – it was the sixth company launched by Wood.

Some of Roku’s other biggest shareholders include Vanguard Group (7.43%), Fidelity Investments (6.77%), BlackRock (5.45%) and Cathie Wood’s ARK Investment Management (4.46%).