ROKU - Roku Inc - Company Description

Roku pioneered streaming to the TV. We connect users to the streaming content they love, enable content publishers to build and monetize large audiences, and provide advertisers with unique capabilities to engage consumers. Roku streaming players and Roku TV models are available around the world through direct retail sales and licensing arrangements with TV OEMs and service operators. The company was founded by Anthony Wood, inventor of the DVR. Roku is headquartered in Los Gatos, Calif. Company description from FinViz.com

Expected earnings February 7th.

Roku is the hottest streaming service going today. Unlike Netflix where they stream movies, Roku streams everything from broadcast channels, cable channels, Hulu, Showtime, ESPN, HBO, Directv Now, Amazon Video, Sling TV, Google Play, ABC, NBC, CBS, FOX, Disney channels, 140 Sports channels, European channels, Asian channels, hundreds of other channels and even Netflix. Roku is a set top box or in the case of new TVs just a USB flash drive and a remote. Recently, most smart TVs come with the Roku app preloaded.

Manufacturers are partnering with Roku and nearly every content generator is putting their content on Roku. This is the answer to cutting out those sky high cable bills. This is the cord cutting device for millennials.

The challenge is that Roku IPOed at $15 in early October and the stock has run up to $45 in only two months. Some analysts are predicting it will triple over the next two years and others are saying it will return to $15. Short interest is 27%.

Roku is a very small company with a market cap of $789 million. Amazon, Disney, Google or even Netflix could buy them for pocket change and have another highway right into your living room.

I believe this is the wave of the future. The only drawback is that it is not a DVR. The plus side is that you can download almost anything on demand and will not need a DVR for most of your TV viewing.

Roku is currently almost giving away its hardware. This is the Amazon model. Give away the device and profit from the content delivery. Hardware revenues rose only 4% last quarter. Those are one-time sales. Platform revenues rose 137% and those repeat every month. The platform generates 80% of Roku revenues at this point. It has crossed the bridge from being just another over the top box to a service that everyone wants.

I think this company has a better chance of being acquired than seeing its stock triple. The company is too cheap and the service is too easy to use.

The bears point to Tivo and the disaster it became. This is not Tivo. That was a set top box that depended on a cable or network feed to film shows for later viewing. Comcast and Directv killed that service with their own DVRs.

LEAPS are not cheap but if the bullish analysts are right and the stock triples from here, it will be worth the investment. If the bears are right, we will lose some part of the $700 per contract we are going to spend. We will stop out if the stock goes against us.

Buy JAN 2019 $45 call, currently $12.50, initial stop loss $33.75.
Sell short JAN 2019 $75 call, currently $5.30, initial stop loss $33.75.
Net debit $7.20. Potential gain $23.00.


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