SAN FRANCISCO: Roku's stock tumbled 11% on Oct 2 and was on track for
its first loss since the music streaming company's public listing last week,
even after it unveiled a lineup of new devices.
The Los Gatos, California company is riding a wave of consumers
abandoning cable TV and switching to online content, but it faces competition
from larger rivals.
Following a two-day rally last week, the stock remains up 68% from the
price in its initial public offer.
Roku on Oct 2 unveiled an updated lineup of video-streaming gadgets. It
cut its recommended price for the top-of-the-line Roku Ultra to US$99.99 from
US$129.99 a year ago, and added Ultra HD resolution, comparable to competing
devices launched by Apple and Google, which is owned by Alphabet.
Based on its 2016 growth rate, Roku's annual revenue could reach
US$623mil in 2018, putting its current stock price at about 3.6 times revenue,
a level that is expensive compared to other Silicon Valley consumer electronics
makers.
In recent years, fitness band maker Fitbit and camera company GoPro
surged following their IPOs, with Wall Street euphoric about their gadgets. But
they eventually slumped as other device sellers stepped up competition and
analysts slashed their forecasts.
Fitbit traded at over six times expected revenue soon after its 2015
IPO, while GoPro's price/revenue ratio reached nearly eight after its 2014 public
listing, according to Thomson Reuters data. Both lost money last year, and
their stocks have fallen about 90% from record highs to levels equivalent to
one time expected revenue.
New Constructs Research recommended selling Roku's shares, saying in a
report that its stock price implies expectations of revenue growth that are
higher than the company's past performance.
To compete better, Roku has opened its platform to more TV apps than
its peers. It has also focussed on licensing its software to manufacturers like
Sharp, who package it directly on televisions.
Roku's stock was down US$3.03 at US$23.51 at
mid-day. — Reuters
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