What Does Roku, Inc.'s (NASDAQ:ROKU) Share Price Indicate?
Today we're going to take a look at the well-established Roku, Inc. (NASDAQ:ROKU). The company's stock received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$168 at one point, and dropping to the lows of US$83.87. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Roku's current trading price of US$83.87 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Roku’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
View our latest analysis for Roku
Is Roku still cheap?
Good news, investors! Roku is still a bargain right now. My valuation model shows that the intrinsic value for the stock is $127.74, but it is currently trading at US$83.87 on the share market, meaning that there is still an opportunity to buy now. However, given that Roku’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from Roku?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Though in the case of Roku, it is expected to deliver a relatively unexciting earnings growth of 1.3%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.
What this means for you:
Are you a shareholder? Even though growth is relatively muted, since ROKU is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on ROKU for a while, now might be the time to make a leap. Its future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy ROKU. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed buy.
Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. In terms of investment risks, we've identified 2 warning signs with Roku, and understanding these should be part of your investment process.
If you are no longer interested in Roku, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
