Roku’s Stream Runs Dry: Time To Switch Channels

Summary:

  • Roku’s stock is perceived as undervalued due to its previous higher valuation and its substantial cash reserves, comprising 20% of its market cap.
  • The company’s debt-free status and significant cash position provide strategic options, but only if the cash is wisely deployed for solid returns.
  • Despite the potential for a strong EBITDA, Roku’s valuation at 48x this year’s EBITDA is not compelling given the intense competition in the TV streaming industry.
  • Overall, Roku’s competitive landscape and valuation concerns make it an unattractive investment, even with its cash reserves.

ROKU Headquarters

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Investment Thesis

I believe that the bulk of Roku’s (NASDAQ:ROKU) investment thesis can be summed up as two considerations. At one point, the stock was higher, therefore many investors believe it now to be undervalued. Also, close to 20% of its market cap is


Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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