How To Buy Roku Stock: Video streaming is everywhere. Nearly half of all households in the United States subscribe to at least two streaming services – and they aren’t all cord-cutters.
Around 53% of homes that subscribe to one or more video streaming plans also have pay-tv service. While many of the major players (e.g., Netflix, Hulu) work on multiple devices, many of the newest offerings are put forward by the companies that make streaming video products, like Apple launching the subscription service Apple TV+ and making Apple TV or Amazon Prime and Fire TV.
Standing somewhere in the middle of all of it is Roku (ROKU).
Time to “Roku” Your Portfolio Returns?
Roku is unique because it doesn’t have a video streaming offering (Note: There is Roku Channel, but that is a free service). Instead, Roku specializes in making the devices that enable streaming video.
Its products function like a smartphone or tablet. Users download video streaming apps to the device and then use log in information that is unique to each app.
Roku just puts it all in one place and, unlike devices that are made by companies which offer streaming services, every app on Roku is treated equally.
Roku devices start at under $30 and there is no monthly fee. Users just plug the device into the HDMI port of their televisions, and they can start watching in minutes.
While there are many paid subscription channels, like Netflix, Roku has a variety of viewing options that are completely free. Roku also makes smart TVs that have Roku capabilities built-in, so no other device is required.
Is Roku Stock a Buy?
Roku was one of the earliest companies involved with video streaming and it continues to grow as more people leave legacy pay TV providers in favor of streaming media.
Furthermore, there is an increasing number of ad-supported streaming television options that are free to users – some of which are not available on other devices.
Roku provides an access point for those opportunities for a minimal, one-time cost. The company’s focus is on becoming a platform that connects users to the video streaming ecosystem, enables creators to reach audiences, and provides marketers with new opportunities to reach target audiences.
Roku has three core activities in its business model.
1. Increase Number of Accounts: Roku works to increase its number of active accounts by making its entry-level streaming device low-cost and by licensing Roku capabilities to TV brand partners. Its efforts in this regard are working. One out of every three smart TVs sold in the United States in 2019 was a Roku TV and many more people have stand-alone Roku streaming devices.
2. Promote User Engagement: Roku promotes user engagement by offering a wide variety of streaming channels and platform that functions well. The total number of streaming hours on Roku has increased significantly as a result. In 2018, users streamed 24 billion hours. As of the end of 2019, Roku had 36.9 million customers with active accounts and together, they streamed over 40 billion hours of content.
3. Monetize User Activity: Finally, Roku monetizes that activity by offering paid, relevant ads (so as not to damage user engagement) and taking a cut from subscriptions sold through the platform. From the beginning of 2019 to the end of the year, Roku’s average revenue per user moved from less than $18 to over $23.
What to Know Before Buying Roku
Roku had some big successes in 2019, but they also ended the year in the red. As of December 31, 2019, Roku had a deficit of $313.8 million and net loss of $59.9 million for the year – and per its annual report, Roku expects to incur more significant expenses going forward.
Keeping its pricing so low exposes the company to weak margins. If taxes or other costs go up, that erodes Roku’s ability to make a profit. While many companies would just increase their prices, offering streaming devices at a low-cost is a core component of Roku’s business model. It has to continue to do so.
At the same time, competition in streaming devices is fierce and the number of devices available that enable video streaming increases all the time. Amazon, Apple, and Google each compete directly with Roku in this regard and are starting to have the same sort of licensing deals that Roku has.
As new streaming options come available, some of which does not have commercials, Roku could see its customer base erode as some users switch to different providers.
The industry is highly competitive, and the number of players is increasing all the time. Anyone investing in Roku needs to understand how the industry evolves and what it is about the company that could fuel its success (or limit it) going forward.
Open a Brokerage Account
If you think that Roku is worth your investment dollars, you will need a brokerage account, like tastyworks, to buy shares in the company.
That may sound pretty complicated but online brokerage accounts are easy to set up. You just open an account, transfer in some money, and you are ready to trade.
Many of these online brokerages have zero required account minimum and take $0 commissions per trade. Plus, they often have offers that give you a credit for depositing a minimum amount.
How to Place a Buy Roku Stock Order
To actually buy the stock, you will need to place an order. There are two types. The first is a market order. This type of stock purchase is processed as it is received.
The problem here is that the share price could fluctuate. A few pennies one way or another may not matter to many traders, but you should be aware of the potential for a price swing. When a stock is very stable and traded often, like a blue-chip company, the difference is usually minimal, but not always.
In some cases, such as when volatility is high, there is breaking news, or a stock is not often traded, the actual price you pay for a stock could be significantly different from the price you saw when you submitted your order. To prevent this from happening, place a limit order.
This says that you will purchase the stock only as long as you can buy shares for a set amount or less. While your purchase may not go through if the stock pops off, at least you won’t risk paying substantially more for your investment than you intended.
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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.