Hold: Roku (ROKU)
From Cabot Top Ten Trader
ROKU hasn’t been a great pick so far this year. In fact, the timing couldn’t have been worse, with shares topping out with the market in January and taking it on the chin through early April. A so-so Q4 report in February (sales up “only” 28%, which was a deceleration from prior quarters) didn’t help.
That said, if you own ROKU, we’d still hold for two reasons. First, the Q1 report was very good—revenue growth (up 36%) re-accelerated, but more importantly, the sub-metrics were encouraging (active accounts up 47% to 20.8 million; streaming hours on its platform up 56% and 25% of all smart TVs sold in the U.S. in Q1 were Roku TVs). Best of all, the firm’s platform revenues, which drive growth and make up the majority of the total, doubled from a year ago.
Interestingly, ROKU didn’t react well to the report, but it has done excellently since, rising persistently since the second half of May. I’d be looking for a better, lower-risk setup to buy, but if you’re already in, we’d see how far this comeback can go.
Michael Cintolo, Cabot Top Ten Trader,www.cabotwealth.com, 978-745-5532, June 21, 2018