Ruu’s share price performance was better than its rival Netflix [NFLX], up 32.21% so far in 2021. Netflix shares are almost flat so far this year, up 1.51% year-to-date and just 4.53% over the past 12 months through yesterday’s close. Additionally, Roku’s stock outperformed the US media and entertainment industry as a whole. The iShares Evolved US Media and Entertainment ETF [IEME] recorded an increase of 13.12% since the beginning of the year and 50.86% in the last 12 months. Roku is currently the largest holding in the ETF with a weighting of 5.22% (as of July 9).
From small player to market leader
The Roku share price has benefited greatly from the demand for streaming during lockdowns and home orders. But even as economies start to open up again and restrictions are lifted, Roku has recorded some impressive numbers.
In the first quarter of 2021, the company achieved sales of
, an increase of 79% year-on-year and its strongest growth since its IPO in September 2017, CNBC Remarks
. The platform’s revenue, which includes advertising, increased 101% to
and the company added 2.4 million active accounts, bringing the total to 53.6 million
The growth of the platform has been greater than that of other ad technology platforms such as Pinterest [PINS], which grew by 78%, Amazon [AMZN], which increased by 77% and Snapchat [SNAP], which rose by 66, according to Loop Capital analysts rated and reported by CNBC.
Roku has come a long way since he started life as a unit of Netflix, building material for his now streaming rival before the team was formed in 2008 as a separate company. Today, it is the American market leader in streaming video distribution.
In the first quarter of this year, Roku had a 36% market share of the domestic video distribution market, the same as Amazon’s Fire TV, but well above the 12% and 8% market shares held by Apple. . [APPL] TV and Google [GOOGL] Chromecast, based on data from Parks Associates and reported by CNBC. In 2020, Roku’s market share was 38% versus Amazon’s 32%.
Data shows that while Roku’s share of the domestic video distribution market has remained at around one-third over the past five to six years, Amazon Fire TV has tripled its market share since 2015.
Following the first quarter 2021 earnings report, analysts at MoffettNathanson released a note to clients in which they raised concerns about what growing competition could mean for Roku’s share price.
“If this was a less competitive market, we would all be on the Roku opportunity… The problem is that in the long run, we are not convinced that Roku has built a gap big enough to keep the competition out. to get started – and this is certainly more true outside the United States, ”they wrote, as reported CNBC.
Analysts reiterated their neutral rating and their target of $ 360 for the Roku share price, which implies a 14.1% drop from its closing price on July 7.
Could the original lineup give Roku the edge?
One way for Roku to try to beat the competition is to invest in original programming. The company plans to spend $ 1 billion next year, although this is overshadowed by the $ 17 billion Netflix is expected to spend this year.
Roku has already made strides by paying less than $ 100 million for content originally created for and distributed through the much-criticized and now-defunct Quibi platform.
In an earlier note published in March, analysts at MoffettNathanson wrote: “In order to better compete with a new generation of now fully integrated AVODs [advertising video-on-demand] competitors, we think Roku will need to ‘move up’ to original content (a la Netflix) and move away from commoditized library content, ”LightReading reported,
“The acquisition of the nascent Quibi library is the first step. This pivot will be costly, filled with more risks of execution, ”they continued.
Tim Nollen, director and senior analyst in media, entertainment, advertising and advertising technology at Macquarie Bank, raised his target for the Roku share price from $ 400 to $ 485 – an increase of 15, 7% compared to its current price –
“Based on the long run we are anticipating in device and advertising sales,” he wrote in a note to customers seen by Barron’s.
Nonetheless, Nollen is cautious. He believes there is a risk of slower growth in the second half of the year, which could potentially affect Roku’s share price.
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