Roku Inc. (NASDAQ: ROKU) stock has fallen over 13% in the past month and over 8% in the past three months due to a more challenging year ahead. Also, the stock, which remained lower on Tuesday, is impacted by the departure of finance chief Steve Louden, who will be leaving after a new successor is appointed by the company. However, the TV streaming platform operator has seen its stock soared more than 306% in 2019.
Investors remained concerned about the departure of Louden, who joined Roku as CFO in 2015 and played an important role in the public listing in September 2017. Traders believed that Roku’s position could turn worse in the TV streaming space due to stiff competition from the giants Netflix (NASDAQ: NFLX) and Amazon (NASDAQ: AMZN).
The company’s growth is likely to slow and limit future potential due to the stiff competition. The market experts, meanwhile, believe that the competition in the TV streaming could increase next year due to large technology companies and the penetration of new and growing companies in the market.
In the past year, the stock has shown outperformance backed by its operational excellence and performance from each of the last four quarters. The investors were positive on Roku to be the ultimate winner in the competitive streaming services climate as the company delivered a sticky streaming video experience to 32 million households.
However, the market experts believe that the subscribers’ growth could decelerate in the future due to a possible change in the users’ habits. On average, Roku users spend 3.4 hours a day on streaming. However, the next-gen won’t possibly be hardcore streaming users due to the advancement of technologies and smartphone penetration.
Also, rivals are likely to give a stiff fight with Roku by capturing the audience with subsidized hardware. The competitors are willing to take losses in pursuing Roku’s audience. The peers could offer the premium streaming services at a subsidized rate as well as the consolidation of the same are likely to hurt Roku in the long term.
The current valuation levels showed better growth expectations but there remained risks in Roku continuing to execute its strategy to capitalize on the shift to streaming. During 2020, the company’s revenue and gross profit growth could slow as expected. It is expected that the stock could take a dip next year due to growth expectations risks.
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