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A Shift Toward ‘Isolationism’ Will Boost Roku Stock

Josh Enomoto

It might not look like it from a cursory glance at Roku’s (NASDAQ:ROKU) year-to-date performance, but Roku stock might be one of the best investment options during this coronavirus pandemic. Prior to our moment of extreme crisis, the stock moved substantially higher on the cord-cutting phenomenon. This and everything else that made the company special will be even more pronounced over the next several months.

A Shift Toward ‘Isolationism’ Will Boost Roku Stock

Source: Shutterstock

First, the obvious thesis for Roku stock is that the streaming firm has a “hostage” audience. Obviously, there’s not much to do right now. Furthermore, a growing number of states have issued mandatory stay-at-home orders. Thus, the government is forcing you to sit on your rear.

In some fortunate cases, employers are paying their workers to do the same. Therefore, however long the coronavirus lasts, the greater the “organic” marketing opportunity for Roku.

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Second, this virus will very much last for an unexpectedly long time. President Trump doesn’t expect a long, drawn out shutdown. Unfortunately, Trump’s advisors are feeding him wonky information (at least that’s what I hope is going on).

U.S. coronavirus cases accelerating


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Source: Chart by Josh Enomoto

Because Washington, D.C. has no shortage of morons, we wasted valuable time in addressing the coronavirus early. Now, the virus’ growth rate in the U.S. is worse than China’s or Italy’s measured at the time when the three countries first had serious cases of community spread (between 62 and 79 cases).

Since the virus is out of control, we’ll have a far longer infection curve than perhaps any other affected nation. Ironically, that’s called putting “America First.”

Still, if you’re a patient investor, this is great news for Roku stock. Essentially, the marketing opportunity will extend indefinitely.

Changing Social Behaviors May Skyrocket Roku Stock

Let’s address some low-hanging fruit first. Obviously, the on-demand element that supports Roku’s free and premium channels offer convenient entertainment options. Unlike linear TV, you don’t have to wait for your favorite programs to appear. In a tense moment like this, this capacity is a godsend.

Further, streaming itself represents serious cost savings. Basically, you pay for what you want to watch and nothing else. With unemployment likely to surge to unprecedented levels, consumers stretching their dollars may translate to higher returns for Roku stock.

But the biggest change I see which can positively impact shares is the potential for seismic social changes. Out of nowhere, Americans have been forced into a new normal, where isolation is the rule, not the exception. Concepts such as social distancing have been accepted and embraced by the American people.

Further, we know from history that certain cataclysmic events have changed the character of America. In fact, the Washington Post reported in October 2019 that teens who suffer during an economic crisis carry the behavioral impact well into adulthood.

Put another way, the coronavirus will permanently scar an entire generation of Americans.


However, with regards to Roku stock, the scarring could be a positive development. Again, with paranoia being the new norm, we could see a marked increase in isolationist behavior. And if that’s the case, this largely benefits streaming-related businesses.

Certainly, Roku stock will enjoy its industry’s rising tide. Recently, AMC Entertainment (NYSE:AMC), Cinemark (NYSE:CNK) and Regal Cinemas announced that they will temporarily shut down. For some cineplex locations, it might be a permanent closure as infection fears linger long after the coronavirus is gone.

It’s a sad commentary but it’s also a very real risk to traditional entertainment business models.

Focus on the Long Term

Now, that’s not to say that old Hollywood is dead in the water. For example, the drive-in theater model has witnessed an uptick in business. Honestly, it’s a perfect way to enjoy the big screen experience while also practicing social distancing.

But in the end, I believe the convenience factor of streaming will win out over this nostalgic revival. Even if the pandemic were to mysteriously disappear overnight, Roku stock will maintain many bullish arguments. Purely stacked against linear TV, streaming is far more convenient. And whether or not we’re in a crisis, everybody loves saving money.

In the bigger picture, I see the many mandatory shutdowns as an opportunity for families to cut down their budgets to the essentials. And what easier budget cut to make than to cancel expensive cable subscriptions and go over-the-top with Roku?

Well before the coronavirus became a thing, consumers have asked this very question. Today, almost everybody is thinking along the same lines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. As of this writing, he owned shares of AMC stock.

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