Here I am going to try and value Roku, Inc., the Los Gatos, California based company that manufacturers various digital media streaming players that allow customers to access Internet streamed video or audio services thorough televisions. Basically, Roku is a play on internet streaming, much like Netflix.
The main revenue stream for Roku is from selling its media streaming devices, which allow you to stream various television channels and televisions shows. The emerging revenue driver for Roku is tailored advertising. Roku uses its information on customers to sell tailor made advertisement services to companies.
Roku Inc., is currently valued at 15.36 billion USD by US public markets. Is Roku undervalued? Yes. I think Roku is worth 100% more or in other words I am expecting Roku to double its market capitalization in the next 1-2 years. Currently Roku trades at a trailing one year Price/Sales ratio of circa 20. But if you take the last reported third quarter 2019 run rate of 261 million USD revenue, Roku is trading at a run rate Price/Sales of circa 15.
Streaming is one of the next big things. Roku's revenue is growing by an excess of 50% compared on an yearly quarterly basis. What is more, Roku is on the verge of becoming profitable exhibiting net profit margin of on average -5% in the last four reported quarters. I think Roku is undervalued mainly due to the huge potential of streaming, which is basically a merger between Internet and Television. A risk for my valuation is the possibility of a not too distant global economic recession. If a global economic recession comes, Roku's stock price and market capitalization will fall a lot.
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Petar
Vladimirov Posledovich is not liable for any investment losses incurred
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Petar Posledovich
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