Therese Poletti’s Tech Tales: As Netflix and Disney move into ads, will Roku look to sell?

by | Nov 9, 2022 | Stock Market

Is Roku broken? The streaming company’s disappointing holiday forecast, coming ahead of new, cheaper ad-supported streaming packages from Netflix Inc.
NFLX,
+1.88%
and Walt Disney Co.
DIS,
-0.53%,
has added to what was already a woeful 2022 for Roku Inc.
ROKU,
+1.53%.
The stock has plummeted nearly 80% so far this year, wiping away close to $24 billion in market value and leaving the company worth less than $8 billion. That has led to some downcast views on Roku’s future.

“The outlook is quite tough going forward for Roku and (being facetious) our view is that Roku is indeed Broku as a stock (and it remains to be seen if it is Broku as a company amidst all of these hurdles),” Pivotal Research analyst Jeffrey Wlodarczak wrote in a note to clients last week. Roku, which sprang up within Netflix to develop technology that would make it easier to watch streaming content on television, was founded by the executive who invented the DVR, Anthony Wood. But after spinning Roku out into its own company and eventually going public, Wood and other company execs played down the hardware that Roku sells and instead pointed to potential growth in its platform, which welcomes all kinds of streaming services along with its own ad-supported free streaming service. The ad-supported service is the biggest question now, as the premium streaming services also move into ads. That could pull advertisers away from Roku just as many companies are cutting back on marketing budgets amid economic uncertainty. The history of Roku: The man who gave us the DVR says Roku is the future of TV That puts Roku between a rock and a hard place. As the macroeconomy continues to slow, heading toward an expected recession, advertisers appear to be spending on sure things and the biggest potential audiences. And what investors are seeing is that Roku is not among the first choices for the big ad buys. Alphabet Inc.’s
GOOGL,
+0.46%
GOOG,
+0.29%
Google saw a big slowdown in revenue, but even with ad revenue $2 billion below expectations in the third quarter, the company still had an overall revenue gain of 6%. (Analysts were also concerned about its high hiring costs.) Wood, who is also Roku’s CEO, tried to differenti …

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