Roku (NASDAQ:ROKU)
2022 has not been kind to Roku (NASDAQ:ROKU). Direct effects of the coronavirus pandemic, such as supply chain interruptions, rising inflation, and shifting consumer behavior, are proving challenging for the organization.
Together, these factors contribute to a decline in Roku’s business. Consequently, Roku’s share price has dropped by 85% from its highs. However, Roku’s challenges are temporary. Meanwhile, a positive trend is the increasing number of people ditching cable in favor of streaming services. Should investors consider Roku stock a purchase despite the company’s current challenges, or do its long-term prospects outweigh its competitors? Let’s address that in the following section.
Roku is Taking on More Expense
Roku (NASDAQ:ROKU) business saw initial gains due to the coronavirus outbreak. Many people were staying indoors more often, and watching content online was rapidly rising in popularity. In 2020, Roku’s revenue grew by 57.5 percent, and in 2021, it grew by 55.5 percent. However, prices soared due to the epidemic’s secondary effects, making it a headwind.
Companies battled one another for control of limited resources. Competition for contracts drove up prices, which most businesses then charged to their customers. A different strategy has been implemented by Roku’s upper management. Roku (NASDAQ:ROKU) is absorbing the expense of inflation instead of passing it on to customers in the form of pricing hikes. Over the past five quarters, Roku’s player division has posted a negative gross profit margin. The losses are increasing; that much is true.
Additionally, growing inflation is putting additional strain on household budgets. Expenditures on necessities like food, rent, and gas are rising, leaving consumers with less disposable income. Several businesses have cut their advertising budgets in light of the gloomy macroeconomic climate. Roku’s (NASDAQ:ROKU) declining revenue-growth prospects were blamed by management for these problems.
Countless People are Abandoning Their TV Subscriptions.
Roku’s long-term prospects remain bright despite these short-term challenges. People can stream video from the business’s platform to their TVs using players the company sells. Roku (NASDAQ:ROKU) also collaborates with makers of televisions to make its software the default on such devices. Roku is the most popular smart TV OS in the United States and Mexico.
Furthermore, eMarketer predicts that the number of U.S. homes with traditional pay TV subscriptions will fall from 68.5 million in 2022 to 57.2 million in 2026. Roku, the most popular streaming media player in the United States, stands to benefit significantly from the migration of these homes to this new medium.
A Low-Priced Assessment
Roku (NASDAQ:ROKU) is now cheap after a massive 85% drop in stock price. Based on this criteria, the current price of Roku stock—3.2 times its sales—is the lowest it has been in the last five years.
Roku (NASDAQ:ROKU) stock is a buy at the moment because of the company’s promising long-term potential and low price.
Featured Image: Megapixl @Michaelvi
Author Shariq Khan 