Roku Inc. (NASDAQ: ROKU) is the streamer everybody forgets about. To explain, Roku manufactures video streaming devices and streams vast amounts of content.
Roku (ROKU) is trying to compete with Netflix (NFLX), Disney+, Amazon Prime, Peacock, Paramount Plus, HBO Max, and the zillion other streaming services by offering exclusive content. That content includes an exclusive show the thriller Cypher premiering next week.
Roku also owns the programming library of the defunct streaming service Quibi. Roku is trying to attract viewers with its free Roku Channel. The Roku Channel offers enormous amounts of free programming including reality shows, classic sitcoms, and 1980s movies.
The Roku Channel offers subscriptions to many streaming services. Those services include Showtime, Cinemax, Starz, Acorn, Fox Nation, and Shudder. The Roku Channel is available through Roku devices, Samsung Smart TV, and the Roku Mobile App.
Roku’s signature products include Roku TV, Roku Audio, and Roku Players. Investors buy Roku (ROKU) because they think it will make money no matter what streamer people watch.
To explain you can watch Paramount Plus, Netflix, and Disney+ on Roku. Thus, you could theoretically profit from all the streamers. Plus, Roku’s platform attracts tens of millions of viewers.
There were over 50 million active Roku accounts in the fourth quarter of 2020, Roku estimates. Roku also estimates its users streamed 58.7 billion hours of TV in 2020. A Roku press release claims the amount of hours streamed grew by 55% between fourth quarter 2019 and fourth quarter 2020.
In contrast, Statista estimates Roku had 51.2 million users in fourth quarter 2020. Statista estimates Roku’s user base grew from 36.9 million in the third quarter of 2019 and 11.3 million in the third quarter of 2016.
Thus Roku offers enormous amounts of growth, but does it make money?
Does Roku Make Money?
Roku (NASDAQ: ROKU) is making money. It reported a quarterly operating income of $65.15 million on 31 December 2020.
The quarterly operating income grew from -$17.38 million on 31 December 2019. Similarly, the quarterly gross profit grew from $161.65 million on 31 December 2019 to $305.46 million on 31 December 2020.
Roku offers impressive revenue growth. Stockrow estimates that Roku’s revenues grew by 58.03% in the quarter ending on 31 December 2020. In comparison, the revenues grew by 49.14% in the quarter ending on 31 December 2019.
Consequently, the quarterly revenues grew from $411.23 million on 31 December 2019 to $649.89 million on 31 December 2020. Thus, Roku is growing, but its income is small.
How Much Cash Does Roku Generate?
Roku (ROKU) generates some cash. It reported a quarterly operating cash flow of $47.05 million on 31 December 2020.
The quarterly operating cash flow grew from -$10.58 million on 31 December 2019. Comparatively, the quarterly ending cash flow fell from $130.47 million on 31 December 2019 to $45.02 million on 31 December 2020.
Thus, finished 2020 with more users and less cash. However, Roku reported a $589.83 million ending cash flow on 31 March 2020.
Roku borrowed money in every quarter of 2020. To explain, Roku reported a positive quarterly financing cash flow in every quarter of 2020. However, the quarterly financing cash flow fell from $254.20 million on 31 December 2019 to $4.35 million on 31 December 2020.
Roku had $89.87 million in total-long term debt and $94.74 million in total debt on 31 December 2020. The total debt fell from $99.61 million on 31 December 2019.
What Value Does Roku Have?
Roku (ROKU) had some value in the form of $1.093 billion cash and short-term investments on 31 December 2020. There was also $2.271 billion in Total assets on the same day.
Roku gained value in 2020. The cash and short-term investments grew from $517.33 million on 31 December 2019. The Total Assets grew from $1.470.23 billion on 31 December 2019.
Thus, Roku has some value, but I consider this stock grossly overvalued.
Mr. Market Overvalues Roku
I think Mr. Market paid far too much; $354.88 share, for Roku Inc. (ROKU) on 16 March 2021.Roku’s share price skyrocketed from $78.81 on 12 March 2020.
I see nothing at Roku that is worth $354.88 share. I think Roku stock is in a bubble that will collapse.
I believe investors need to avoid Roku because Mr. Market overvalues it and the company pays no dividend. I think Roku is an overvalued stock that will collapse.