February 22, 2018

Roku shares jump more than 50% in trading debut

29 September 2017, 12:40 | Frank Carlson

Roku just priced its IPO at the top of its range, fetching a $1.3 billion market cap before trading on Thursday

What to Watch for in Roku's $219 Million IPO

Roku hopes investors will tune in to the company's initial public offering.

The stock, which trades under the ticker "ROKU", debuted on the Nasdaq, and soared as much as 30% above its IPO price initially.

So why should investors roll the dice on Roku when it begins trading at $14 a share?

By comparison, revenue generated on the platform, such as ads and subscription fees, grew 91% year-over-year to $82.4 million in the first half of 2017. But the Los Gatos, Calif. -based company still loses money: It posted a net loss of $42.8 million in 2016, steeper than the $40.6 million the year before. According to the company's filing with the Securities and Exchanges Commission, advertising accounted for 67 percent of Roku's non-hardware revenue for the first half of 2017.

At the moment, Roku still makes most of its money from selling streaming players, but with its emphasis on future advertising revenue, Roku has focused on growing its user base through programming - the company has more than 5,000 channels within the USA and 3,000 internationally - and hardware. It generated revenue of $199.7 million in the first six months of 2017, up 23% from $162.3 million in the same six months of 2016.

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While it's a popular name among cord-cutters, Roku must now prove to investors that it can compete with the tech industry's leaders. Roku has also seen increasing competition from companies like Apple, Google and Amazon, which all sell their own streaming TV devices.

Roku is poised to capitalize on the popularity of streaming content.

Even though CEO Wood isn't anxious about his company's ability to compete, investors will have to decide if Roku's market share and option-oriented platform are enough to set the streaming device maker apart.

"We are in a golden age of TV", Roku said in its prospectus.

It could become the mother of all technological revolutions. Earlier reports had Roku targeting a $1 billion market cap but the pricing of the IPO values it at $1.3 billion.

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