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Roku's Slowing Growth Creates A Big Problem For The Stock

Aug. 05, 2021 1:35 PM ETRoku, Inc. (ROKU)62 Comments


  • Roku reported better than expected results.
  • Results were not good enough as the company showed a clear deceleration for active accounts and streaming hours.
  • Roku is in a very competitive market and faces a big growth question.
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Roku sign and logo on the modern facade of consumer electronics and broadcast media company headquarters in Silicon Valley
Michael Vi/iStock Editorial via Getty Images

Roku (NASDAQ:ROKU) shares are tumbling on August 5 following earnings and revenue that topped consensus estimates. Revenue came in at $645.1 million, which was 4% better than expected but missed the street

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This article was written by

Mott Capital, aka Michael Kramer, is a former buy-side trader, analyst, and portfolio manager with 30 years of experience tracking market fundamentals. He focuses on long-only macro themes and studies trends and unusual options activities to identify long-term thematic growth opportunities.

He leads the investing group Learn more .

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Comments (62)

Congratulations Mott! you finally nailed one in ROKU
Timrio profile picture
And what’s the trend on platform revenue growth— the one metric that really matters in the end?

Would love to see how you spin that!
@Timrio - It really is all about the platform revenue which is exploding and ARPU. The product mix is a little choppy the 2nd half of 2021 but total revenue and EPS are outstanding.
disagree, this will be $550 soon. (and i dont even own any)
Balance sheet guru profile picture
@Jboosted92 Really? Dream on.
Skyfall7 profile picture
Have you thought about using some different technical indicators? You said in May if broke $300 support would drop to $225, did break & bounced right back as majority comments predicted. Maybe try EW?
ijeff profile picture
@Skyfall7 Seems like support is holding around $385. Wouldn't be surprised if it shoots past $400 again soon.
Skyfall7 profile picture
@ijeff it will I’m sure. See Roku investors, so many genuinely love the product & use it constantly. Rarely seen such feedback about the actual product on investment site. So imagine wider users feel & do same! And the olympics views not even accounted for.. Advertising will grow & grow!
And EW not let me down yet on Roku.
hugo2 profile picture
@Skyfall7 What is EW ?
Be careful of your thesis, the decline is the yoy growth rate. Not hours or accounts, with bigger base built in last year ‘s pandemic explosion, this growth rate deceleration is expected. So it is not the point u should concern
Jeff Boyd profile picture
I love Roku operating system but it is not perfect.


One can argue that HBO Max streaming problems are all HBO Max's fault but I wasn't shocked that they have problems on Roku. I have more issues with my Roku devices which crash/freeze more frequently than my Fire Sticks. My IPTV provider's app isn't even on Roku and some apps such as HBO Max apprently simply work better on Fire Stick. Then there is voice recognition where Roku is clearly behind.

Still prefer Roku's interface and control but aside from that Fire Stick is better. Amazon is not dead in the sector...yet anyway.
@Jeff Boyd My crashes are exclusive to Hulu. It's most likely not Roku.
Jeff Boyd profile picture
@RockyCT When I first got IPTV service from my internet provider I was kind of ticked that they didn't have a Roku app (Firestick only). Now that I've thought about it some more it must either be because Roku won't allow them to place their app without payment or something similar to what the current stand-off with Youtube TV is about or possibly that it is just their ecosystem is difficult to work with.

I'm inclined to think Roku is just excluding them, but regardless of the reason, I'm less ticked at my provider. Longer term IPTV, (android) boxes are how cable (and telephone companies with fiber) will remain relevant.

Cord-cutting might just level off if the cable/phone companies bundle internet/tv products effectively as my local phone company is doing.
ijeff profile picture
@Jeff Boyd We are all just offering anecdotal evidence, but I must save in 3 years I have never had a Roku crash. Might just pertain to particular apps. I've probably only used about a dozen apps on Roku and typically I'm using only 6 or so on a regular basis.
Skyfall7 profile picture
You said it! The results are strong 💪!
What do you do in spring/summer sit in watching Netflix? Hope not. With all the weight of Amazon behind Fire device achieved less “ active” users. Just demonstrates ROKU have far superior device sold by word of mouth. Didn’t even spend much on marketing last year. I’m looking at it reversing & lifting to 500 & beyond over next year.
Timrio profile picture
@Skyfall7 I think Roku will spend a little more in the second half to increase active accounts. Might be time for a well placed tv commercial on cable channels. Just like FUBO has done with their TV ads.
Skyfall7 profile picture
@Timrio .. agreed.. I they said they held back on marketing in 20-21 as demand huge anyway & like most supply issues on new devices so not worth it.
Cancelled Netflix. Garbage.
Your last article said more downside was ahead at $300 per share. You don’t understand this industry, this company or the change that’s taking place. Your track record on this stock is so horrific it’s worth an article itself.

For those that are interested, yoy for Q2 industry streaming hours declined 2%, linear TV viewing declined 19% while ROKU grew 19%. What’s going on? ROKU took market share at a time when people are watching less TV as covid restrictions have ebbed. Let’s repeat, ROKU is also taking share over all viewing hours and streaming hours. This is the story.

It’s also important to note that ARPU growth is accelerating. Why? Per eMarketer, only 11% of ad $ have migrated to streaming. Keep in mind that ROKU has over 55M households of 123M US households. US account growth can’t grow as fast as it has but there’s plenty of runway internationally. The real growth upside is in converting the other 89% of the TV ad spend which approximates $70B in the US and $250B globally. None of this addresses ROKU’s cut of subscriptions, renewals or VOD (essentially box office $ migrating to the home).

IMO, ROKU is building a platform unlike nearly anything else. They are doing for the TV market what MicroSoft and Google have done with the PC market and what Apple and Google have done with the mobile phone market. The opportunity is huge which is why ROKU carries a large multiple at present and this creates volatility in the share price. Short term investors can be very wrong on the stock price (like the author) if they do not understand the end game. IMO long term investors stand to be handsomely rewarded with patience.

Don’t let others create fear.
ROKU is the only platform that discloses true streaming metrics. They are following a secular trend and still leading it, ARPU is growing at an enormous rate as advertising dollars flood to CTV. Incredible for them to almost top Q4 by the end of Q2 which Roku never does, while having "slowing growth"
Honus profile picture
I have no idea where Roku will be in two weeks or two months, and frankly I don't care. All I know is that the product is fantastic, the user interface is the best in the industry, and this stock is going to be a lot higher 5 years from now.

Disclosure: Long and completely unconcerned with short term noise.
05 Aug. 2021
Classic talk the stock price down because I/we missed out on it long ago while using anecdotal fundamental notions for decision making. Work it...Work it.....
This is quite a pessimistic outlook for the company who is crushing it with cord-cutters. ROKU will be a $500 stock before it will be a $300 stock. Longz ROKU! :-)
augmented reality profile picture
@magenta17 15 negative articles??? LOL
Guaranteed way to make money: Buy Roku the day after MOTT Capital posts an article. Hold for as little as a few days or at least a few months (preferably long term) and over past two years you are up huge!!

Fall and winter will be huge!

In other news, as numbers get larger, continued growth is often smaller %'s....so growth does "shrink"... Damn that thing called math.
Yet another bear report from Mott Capital. You can always count on them. Long ROKU. Added more this morning on the dip.
playing the long term CTV trend and buying on the dips.
Your main argument is: Roku is slowing. But it is not a fact.
Last quarter, traditional lineal TV viewing hours drop by 19% YoY, overall Steaming viewing hours drop by 2% YoY, but Roku streaming hours INCREASE by 19%.

So the fact is: Streaming TV is still replacing tradition TV, and Roku is taking streaming market share from it's competitors.

You are Not a serious reporter.
@william66 He compared it to FireTV which doesn't even disclose its streaming hours on the platform and never has.. So how does he have any clue that Fire TV hours have done better? Which it hasn't, Roku is following the secular trend as leader.
was waiting for this one Mott Capital. More like LOL Capital
j baz
05 Aug. 2021
Ah yes Mott the Bear is back. If you gus are short term traders your big pay day was to sell when it hit 490 the other day, but then you didn't do a write up then did you. It's down because they missed some number for user growth, but the market is missing the blowout earnings number which makes that moot. Advertising dollars will continue to migrate to streaming and Roku is the leader. This little set back is just another buying opportunity. Long since first buy at 40.
Let me see...

Summer's here, right?
Pandemic restrictions are being lifted, right?

And people are watching LESS TV ???
Who wuddda thought?

Joking apart, thanks lots to all the shorters for the money you've made me today. You're really too kind!

Btw... ROKU make money from advertising. Oh, and winter follows summer (hint).
nerd_rage profile picture
@Fundamental Trader ROKU's business model is solid for the future. I've noticed that they're doing something very important: creating a sense of timeliness to streaming, which is inherently agnostic to time. I have Netflix, Amazon etc queues that I don't have to watch at any given time. They sit there forever and then I never get to them. Pretty soon I realize I haven't watched anything from them lately, and then boom, cancelled.

But ROKU creates a sense of time through something as simple as a wallpaper that changes for seasonal events and holidays. They have an Olympics app, prominently displayed, that might only have highlights but it also makes ROKU seem timely. They did something similar for the 2020 election. Even their home page ad space contributes, when DIS or another big studio runs an ad or trailer for a new movie.

ROKU understands that the timelessness of streaming may be great for streaming customers but it's dangerous for streaming purveyors. DIS et al have started doling out episodes weekly, which might battle the timelessness problem but in an aggravating, anti-customer way. ROKU has slicker techniques.
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