What is Positive for ROKU
- Roku’s Q2 FY24 revenue increased by 14%, while operating expenses decreased by 2%.
- Roku is rated as the number one operating system, known for its ease of use.
- The primary revenue source is platform services, mainly driven by advertising.
- Device sales are not yet profitable, though sales are increasing quarter by quarter.
- Roku may be selling devices at discounted prices to attract more customers.
- The company is focusing on building its own content, leveraging its growing user base.
- Gross margin stands at 43%, with potential improvement as device performance increases.
- The number of streaming households increased by 14% year over year, reaching 83.6 million.
Challenges
User Retention: Maintaining a growing user base in a highly competitive market requires continuous innovation and user satisfaction.
Content Costs: Building and acquiring original content can be expensive, potentially straining resources.
Ad Revenue Dependence: A significant portion of Roku’s revenue comes from advertising, which can be volatile and sensitive to economic downturns.
Pricing Pressure: To attract more customers, Roku may need to keep device prices low, which could further delay profitability.
Regulatory Risks: As Roku expands globally, it may face varying regulations and compliance challenges in different regions.
ROKU Stock Prediction 2025,2030,2035
**** Revenue, Income and Cash flow are in millions *****| Year | Revenue | GAAP Income | EPS | Free Cash Flow | Stock Price ($) |
|---|---|---|---|---|---|
| 2024 | 3,900 | (275) | (2.16) | 285 | 40-106 |
| 2025 | 4,485 | (146) | (1.15) | 414 | 40-106 |
| 2026 | 5,158 | 11 | 0.09 | 571 | 40-106 |
| 2027 | 5,931 | 200 | 1.57 | 760 | 40-106 |
| 2028 | 6,821 | 427 | 3.36 | 987 | 134 |
| 2029 | 7,844 | 697 | 5.49 | 1,257 | 220 |
| 2030 | 9,021 | 1,019 | 8.02 | 1,579 | 321 |
| 2031 | 10,374 | 1,400 | 11.02 | 1,960 | 441 |
| 2032 | 11,930 | 1,849 | 14.56 | 2,409 | 582 |
| 2033 | 13,720 | 2,377 | 18.72 | 2,937 | 749 |
| 2034 | 15,778 | 2,998 | 23.60 | 3,558 | 944 |
| 2035 | 18,144 | 3,724 | 29.32 | 4,284 | 1,173 |
Conclusion -Our thoughts
Roku, a relatively small company with a market cap of around $9 billion, is steadily growing its customer base and focusing on developing its own content, which could potentially position it as a competitor to giants like Netflix, Amazon, and Apple TV.
While there is clear growth potential, Roku is not yet profitable, and the stock may remain range-bound between $40 and $106 until profitability is achieved.
The business model appears strong, and the recommendation is to accumulate shares when they are in the lower range of this band.
