By Elizabeth Martinez,
Money and Investing Writer
For those of you who have a passion for artwork but lack the means of obtaining it, Roku Inc. may be worth looking into. The company offers digital image galleries which contain famous works of art, and designs digital media players for digital photo displays on HDTV’s.
They also offer programs which allow digitally saved music to be played through home speakers, and have services where customers can download apps such as Pandora or Netflix. Essentially, using a Roku device, anyone can turn a television with HDMI compatibility into a smart TV for a relatively low price.
Roku’s products have been on the market for only a few years (since 2007, despite the fact that the company was founded in 2002), and mainly competes with the products from companies such as Technicolor (OTCMKTS:TCLRY) and OpenTV Corp. Unlike its competitor OpenTV Corp, Roku is planning to join the ‘big leagues’ by filing for an initial public offering.
Roku filed for its initial public offering (IPO) on Friday, and is prepared to sell up to $100 million in common stock, but has shown no intention of selling any preferred stock. The company has yet to state when the IPO will occur, but it hopes to be under the symbol ROKU.
Roku is claiming to have approximately 15 million active accounts as of June 30th of this year. When you consider that approximately 77% of the 75.4 million millennials and 65% of non-millennials have access to streaming services according to a recent emarketer poll, it looks like this may be a lucrative market for the company.
That said, Roku seems to have a very small percentage of the market share, even excluding the active non-millennials who use these such streaming services. It is also worth noting that the majority of the streaming markets market share is currently belonging to Netflix (NASDAQ: NFLX), which reaches over 80 million viewers in more than 200 countries. Roku seems to be attempting to gain more of the market share by offering more options that merely streaming movies, television shows, etc. by including Netflix streaming options of its own, along with its various digital art and music platforms.
Aside from having content creators to contend with, Roku must also be weary of other products that are similarly able to transform the capabilities of a user’s television.
Specifically, Roku may see some serious competition from Apple’s (NASDAQ: AAPL) TV streaming device, also known as Apple TV, which was released in 2015. Although as of right now, it has been far too expensive to even make a dent in the market, at a retail price of $149 for a 32 GB device, and $199 for a 64 GB device, Apple could decide at any time to drop that price simply to squeeze Roku out. In addition, devices such as Google’s (NASDAQ: GOOG) Chromecast could offer a challenge for the company.
Also, Roku’s financial statements show somewhat less than desirable implications for the company. They have suffered from a negative net margin of 20%, and has a long term loan with Silicon Valley Bank which includes a borrowing power of up to $40 million.
Not to mention that in the company’s Form S-1 registration statement, they admit that investing in their “Class A common stock involves a high degree of risk” which is due in part to their having previous operating losses, and the extremely competitive market which they are in.
As a result of the high risk associated in this industry alone, savvy investors may want to consider more conservative approach when it comes to Rokus IPO.
A version of this article appeared in the Tuesday, September 12th print edition.
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