Some investments you intuitively understand because of their long, proven history. But others, typically those from the broader technology industry, may require you to get your hands dirty before you can truly appreciate them. I put Roku (NASDAQ:ROKU) firmly in this category.
Streaming may be difficult to understand for some Americans, especially those who have known only corded television. Moreover, the streaming industry throws out terminologies such as VSP, CDN, VOD, and OTT that may intimidate traditional TV viewers. Unfortunately, that’s part of the growing pains associated with the ROKU stock price.
For a long time, I only viewed Roku stock through purely “academic” terms. However, one day, I decided I had enough with paying for the ridiculous monthly charges for TV subscriptions. So I cut the cord and decided to go all in on ROKU.
Folks, I ain’t ever going back.
From every angle – convenience, finances, content – streaming TV is overwhelmingly superior to its corded predecessor. Personally, I consider Roku stock as an inverse spiritual investment to Uber (NYSE:UBER) or Lyft (NASDAQ:LYFT).
One of the biggest reasons why ride sharing took off is that it allows people to profit from dormant assets. For instance, why drive just yourself to work when you can Lyft others and pocket some money?
Well, streaming TV applies that same concept in reverse. Why pay for content that you’re not going to watch and enjoy? Anecdotally, I’d estimate that at least 60% of the channels that came included in my TV subscription package benefited from my wallet but without my eyeballs.
Thus, I’m not terribly worried about the sometimes-volatile Roku stock price. In the long run, streaming is the future of TV.
The “Whys” of Traditional TV Bolster ROKU Stock
Any lengthy discussion about streaming TV or content providers will invariably invoke cord-cutting statistics. Indeed, this trend has left many media giants scrambling for answers. Typically, the strategy is to join forces with the movement.
Of course, cord cutting doesn’t bode well for companies heavily levered to pay TV subscription models. Still, a great many Americans continue to find reasons to stay the course with tradition. However, the real risk to pay TV isn’t just cord-cutting; it’s that the reasons to stay tethered are declining in relevance.
Earlier this year, MRI-Simmons conducted a study researching in part the motivations of people considering traditional TV subscriptions. The most popular reason averaged among all demographics – segmented by 18-plus, 18 to 34, 35 to 49, and 50-plus — is the ability to channel surf. The second most-popular reason was that they were offered good deals by TV providers.
Interestingly, only three reasons (out of nine in the study) mentioned factors that are uniquely advantageous for pay TV: the ability to watch live news and live programming, and access to specific TV networks.
Regarding live news, this factor will unlikely threaten the Roku stock price. According to the Pew Research Center, younger Americans overwhelmingly prefer social media as their primary news source.
As far as live programming, this attribute is overrated, at least among the younger, more relevant generation. Based on a Morning Consult/Hollywood Reporter poll, 60% of adult viewers stated that they binge-watched their favorite shows. That’s not possible with live programming.
Finally, network access is the last holdout for some traditional TV channels. However, with another Pew report noting that 61% in the ages 18 to 29 bracket prefer streaming services, any holdouts won’t last long.
Most importantly, all these trends are moving positively for ROKU stock.
Not Entirely Without Risk
Although TV consumption trends favor ROKU, they also benefit its competitors. Namely, the biggest risk factor, especially for this holiday season is Amazon (NASDAQ:AMZN) and its Amazon Fire TV Cube.
Unlike your typical over-the-top device, the Fire TV Cube is a comprehensive entertainment system. Featuring all the goodies associated with high-quality streaming, Cube’s signature attribute is its intuitive voice recognition system. Rather than deal with clunky remote controls, you can talk your way to your favorite content.
Despite Cube’s tech wizardry, though, it does have one critical drawback: price. In contrast, ROKU’s platform offers myriad choices, with the cheapest coming in at $30. Thus, anyone that doesn’t require the absolute best in streaming equipment have ready-made solutions with ROKU.
Ultimately, I’m looking at the company as a buy-on-the-dips opportunity. While shares may be a little bit overheated right now, anything around the 50-day moving average (approximately $130) represents a confident entry point.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.