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Roku (ROKU) Inc.’s stock has risen by more than fourfold so far in 2019, easily making it one of the best performing stocks in the equity market. The streaming media company had seen institutional investors aggressively buying its shares throughout the second quarter.

The strong performance helped the stock to land on the WhaleWisdom WhaleIndex 100 on August 15, making it one of the newest positions to the list. Since inception, the WhaleIndex 100 has risen by nearly 350%, easily beating the S&P 500’s average return of roughly 195%.

(WhaleWisdom)

Buying The Stock

During the second quarter of 2019, the total number of 13F shares held among institutional investors rose by almost 6% to 60.5 million shares from 57.3 million in the first quarter. During the second quarter, 93 institutions initiated positions in the equity, as 91 added to existing holdings. However, 51 sold out of the stock, while 94 reduced.

Roku is known for its streaming media players and the TVs that come preloaded with its software. However, the company has been seeing significant revenue growth recently from its platform business, which generates advertising revenue for the company. This has helped Roku to accelerate its revenue growth beyond the hardware products and TV partnerships.

 

Strong Sales Growth

The robust platform growth has helped the company to post better than expected revenue for seven straight quarters. Additionally, earnings have come in better than expected for six quarters in a row. Most recently, the company not only beat estimates on both the top and bottom lines, but the company also increased its revenue outlook.

Another reason why institutional investors may be piling into the stock is the promise for significant revenue growth. Analysts currently estimate that revenue will rise by nearly 48% in 2019, followed by growth of 35% in 2020 and 31% in 2021. That is a compounded annual growth rate of 38%.

Waiting For a Profit

The one negative for the stock is that it is going to take some time before the company is likely to earn a profit. Analysts estimate that the company will lose $0.47 per share in 2019 and 2020 and will first turn a profit of about $0.51 per share in 2021. It leaves the stock currently at an astronomically high 2021 PE ratio of almost 260.

With revenue growth expected to remain strong for the next several quarters, it is no wonder why the stock has had such a tremendous run in 2019. However, the further the stock price rises, the greater the expectations will be for the company to deliver.

 

This entry was posted on Monday, August 19th, 2019 at 8:35 am and is filed under 13F, Stock. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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