Roku Stock: Uncertain Environment Makes for Tough Outlook

TipRanks2022-03-02

Shares of popular media device maker and streaming pure-play Roku (ROKU) have been free-falling for quite some time now.With another underwhelming quarter in the books, rattled investors have yet ...

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Comments

cHao7
2022-03-02
cHao7
Ok
jtvcak
2022-03-02
jtvcak
[OK]
KYLeong
2022-03-02
KYLeong
Stiff competitions[Facepalm]

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However, questions linger as to whether original content streaming can still produce a solid return on investment.Given how much competition has arisen in the streaming space in recent years, such uncertainties leave Roku’s future in a cloud of haze. For that reason, I am bearish on ROKU stock.Video-Streaming Will Not Be Lucrative ForeverUndoubtedly, a lockdown-era streaming environment probably will not be as rewarding as the post-pandemic one that could be up ahead.Further, a higher level of competition in streaming is leaving consumers demanding more, better, content for less. For Roku, this could be a tough hit, as it seeks to beckon in more users to give the free Roku Channel a go.With various video-streaming services “thrown in” as a part of a larger bundle (think Amazon Prime Video and Apple TV+), other firms must ask themselves if it’s still worth it to spend considerable sums on a high-capex endeavour that seems to favour the large, incredibly liquid firms like Amazon and Apple.It’s these such firms that could give smaller players like Roku a bit of a squeeze.It was easy to dismiss Apple TV+ and Amazon Prime Video in the early days. However, as of late, both services have been getting stronger, with more content that’s getting viewers excited.Roku Faces Scary CompetitionWhat do Amazon and Apple stand to lose if their video services fail to pay dividends? Not much. How about Roku? I’d argue that it stands to gain and lose a great deal. Perhaps too much, given the trajectory of hardware sales and how much expenditures could eat into the bottom line.Worse, Amazon and Apple are pressuring Roku on both the streaming and hardware side. That’s a lot of pressure from all sides and is not a great place to be.With such bundled services like Amazon Prime, it seems less justifiable that one would bother with any other video-streaming subscription service, even if it’s free. There are too many to keep track of these days!Of course, high-rated must-see content could entice users to give a new service a try. Even if users do try, getting new users to stick around is another battle.Wall Street’s TakeAccording to TipRanks’ analyst rating consensus, ROKU stock comes in as a Moderate Buy. Out of 19 analyst ratings, there are 15 Buy recommendations, one Hold recommendation and three Sell recommendations.The average Roku price target is $190.58, implying an upside of 36.2%. Analyst price targets range from a low of $95 per share to a high of $305 per share.Bottom Line on Roku StockFor now, I view Roku’s streaming spend as an effort that may not pay off nearly as large as some of the more bullish analysts on Wall Street expect, given trends I currently see in the video-streaming space.Yes, streaming used to be exciting, but it’s become the norm.With any maturing market, there’s bound to be higher competition and less in the way of economic profits. 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