Buy Low Spotlight: Roku

Roku stock has been tumbling this year, dropping in five of the past six months and losing nearly 50% of its value along the way. It’s likely to continue a slow downturn for now, but some analysts expect a rebound later this summer. Should you buy the dip, or is it simply too volatile to be a good choice?

Is the Market Too Competitive?

The streaming market has become increasingly saturated, not to mention expensive. Powerhouses such as Netflix, Discovery Max, and Disney+ are all steadily raising prices, but their must-see content is keeping a lot of viewers hooked. However, Roku has a unique hook that could help turn its fortunes around: its free-to-use operating system and more than 350 free channels make money from ads while drawing in subscribers who are tired of paying more and more. But Roku also offers subscriptions to premium paid services, including those named above.

There is some concern over a proposed Walmart takeover of Vizio. That company’s SmartCast system does largely the same thing as Roku, but until now, it’s been very much on the fringe. However, if the deal goes through, Walmart could use its immense brand recognition to push SmartCast into becoming a real contender.

What the Analysts Are Saying

The Roku model seems to be paying off, as user numbers, engagement, and average revenue per user are all growing YOY. The company has also generated positive free cash flow for the past three quarters. All signs point to healthy growth in the coming months and years.

Many analysts also feel that the Walmart concerns are much ado about nothing. It’s entirely possible that the deal won’t even clear antitrust regulations. If it does, a lot would have to go right for SmartCast for it to overtake Roku’s longtime brand recognition. In the meantime, Roku hasn’t had any problem competing with the big boys thus far.

Like anything else in tech, there are no guarantees. But now could be the right time to buy into Roku. Once fears about the Walmart deal pass, it has a strong chance of a summer turnaround.

Lisa Fritscher has no positions in the stocks mentioned. Stocks.News has no positions in the stocks mentioned.