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Can Roku Stock Move Higher after Reaching Record Levels?

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Stock is up 254% since IPO

Roku (ROKU) stock was publicly listed on the stock exchange in September 2017. Since closing at $23.50 on September 28, 2017, the stock has gained 254%. As with any high growth company, Roku stock too has been volatile. The stock fell from $56.10 in December 2017 to $31.1 in March 2018.

The stock then rose to $76.5 in October last year before burning significant investor wealth as it fell to $27.3 in December. Roku stock has since recovered and is up by a mindboggling 171% this year. Roku’s sales are expected to grow 38% in 2019, 33% in 2020, and 30% in 2021. Though Roku is still posting a non-GAAP (generally accepted accounting principles) loss, earnings are estimated rise at a CAGR (compound annual growth rate) of 20% in the next five years.

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This robust earnings and sales growth is estimated to drive the stock higher. The stock gained 28% yesterday as it crushed sales and earnings estimates in the first quarter and also provided guidance above Wall Street expectations.

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Competition from tech giants

However, Roku faces competition from tech giants Apple (AAPL) and Amazon (AMZN). In April 2019, Apple launched its TV and TV+ applications, while Amazon has reportedly been looking to expand into this space. Amazon’s Firestick and Apple TV are direct competitors with Roku.

Leveraging the Roku brand

Roku will look to leverage its brand position to drive sales. It claims that 60% of consumers that buy Roku are influenced by its brand name. The Roku Channel also continues to grow and evolve, as 40% of new users reportedly claimed that access to this channel positively influenced their buying decision.

Roku is already leading the streaming platform in the US. There is significant growth potential left for Roku to grow its business domestically. The stock is expected to gain substantial value if it can continue to gain customers and meet Wall Street expectations. And this is just considering domestic growth. We can only imagine the stock’s growth potential if it successfully manages to penetrate international markets as well.

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