According to a Nielsen study published last month, the number of U.S. households with streaming TV capabilities has been steadily growing since 2017. Based on the findings, 65% of American households could stream TV in the first half of the year, up from 59% in the year-ago period and 51% in the first half of 2017.
Bearing this in mind, companies have been lining up to try and take a piece of this expanding market, which could reach $124.6 billion by 2025 according to Grand View Research. When looking for compelling opportunities within this space, Needham’s Laura Martin tells investors Roku beats out Netflix as her top pick.
That being said, we used the TipRanks Stock Comparison tool to dig a little deeper to see how the stocks stands up against each other.
Let’s take a closer look at the results.
Roku Inc. (ROKU)
While both occupy a significant portion of the streaming TV market, Roku and Netflix are two fundamentally different companies. Netflix operates as a subscription service while Roku’s business is based on streaming players and free content supported by ad-revenue.
Martin believes that this key difference will fuel even more gains for Roku on top of the 454% year-to-date growth it has already seen. After meeting with Roku’s management on September 5, Martin’s bullish thesis has only been confirmed. The company expects that the Roku Channel, its free, live and premium TV channel, will be an aggregator of 100% of ad-driven free content as well as over-the-top (OTT) channels and movies.
Any new or existing OTT streaming service will want access to Roku’s 36% of connected TV homes. The five-star analyst estimates that its advertising revenue will also continue to grow as almost $10 billion of the linear TV’s $70 billion of ad revenue moves to Roku.
The company also has an advantage in terms of data. When every new user installs a Roku stick or TV, they must register that device in order to access Roku’s content. This registration process involves assigning a unique Device ID, with the company able to monitor the content that the Device ID views. Roku can then analyze what is viewed compared to the 30 million other households it has data on in order to target ads.
Not to mention Roku is expanding its total available market with its new soundbar and subwoofer.
While some analysts aren’t fans of Roku based on its hefty valuation and lack of positive EPS since its founding, Martin believes that the above factors imply a strong long-term growth narrative. "We would argue that Roku has the superior strategic position because it benefits from all new OTT channels including ESPN+, Disney+, Apple+, HBO Max, etc. because it is an aggregator and therefore gets a share of revenue from every content app it adds to its platform," she explained. As a result, the analyst reiterated her Buy rating and $150 price target.
In general, Wall Street is also bullish on Roku as it has a ‘Moderate Buy’ analyst consensus. Given its massive year-to-date gain, it isn't surprising that its $123 average price target implies 28% downside potential.
Netflix Inc. (NFLX)
It’s no question that the dominant force in the streaming space has hit a rough patch recently. Investors were widely concerned after NFLX experienced a substantial drop in subscriber acquisition in its most recent quarter. That being said, Martin claims that its growing number of competitors will ultimately be its downfall.
Over the next year, Apple (AAPL), AT&T (T), Comcast (CMCSA) and Disney (DIS) will all release their own streaming services to compete directly with Netflix. This is on top of the competition it already faces from Amazon (AMZN), Hulu and CBS All Access (CBS).
Netflix is undoubtedly going to feel some pricing pressure from the competition. For example, Disney+ is a relative bargain with pricing starting at $6.99 per month, with its $12.99 per month premium package that includes Hulu and ESPN+ still less than Netflix’s equivalent service.
Martin argues that with 60 million paid U.S. subscribers as of June 30, NFLX has the most to lose out of all the streaming services. “Parks Associates found 28% of consumers said they have subscribed to a streaming service to check out a single title. By implication, NFLX’s subscribers will at least churn out for a few weeks during the promotional period of each new streaming service launch,” she added.
While the analyst does note that Roku relies on Netflix as the streaming service represented an estimated 20% of Roku’s total streaming hours in the first half of 2019, this is expected to change with the release of Disney+.
Based on all of the above factors, Martin tells investors that NFLX is a Hold.
Wall Street takes more of a bullish stance than Martin. The streaming giant boasts a ‘Strong Buy’ analyst consensus and a $411 average price target, suggesting 42% upside potential.
And the Winner is…
While Needham picks Roku over Netflix, the rest of the Street sees things differently. Even though the Stock Comparison tool shows that Roku has gained the most, Netflix takes the top spot in terms of both analyst consensus and upside potential.
Discover Wall Street’s most loved stocks with the Top Analysts’ Stocks tool
Netflix Vs Roku Stock: NFLX and Roku both benefited from the cord-cutting trends in cable TV subscriptions of recent years, and the stay-at-home orders coming from the national governments in the wake of the coronavirus pandemic have been massive tailwinds for both companies.
But, from a market perspective, which company makes for a better investment – and will one franchise win out over the other? Which business is growing faster, and what are the pros and cons of each?
How Does Roku Make Money?
Roku is a TV streaming company that aggregates a variety of channels into its one, easy-to-use platform.
The business primarily generates revenues from the sale of digital advertising, premium subscriptions, and content distribution deals.
It also generates revenue from its branded devices wing, where it sells TV players and other hardware such as sound bars and streaming sticks.
Is Netflix Losing To Roku?
Netflix is still the leading streaming company worldwide. The firm streams to over 190 countries and has double the subscribers than its nearest rival.
However, when it comes to subscription growth, the picture is a little different. Roku has grown its active account numbers from 27 million in 2018, to 57 million in 2020.
Over the same period, Netflix grew its subscriber base from 139 million, up to 204 million. This meant Roku’s compound annual growth rate (CAGR) was 37% compared to Netflix’s 21%. Quite a difference.
There’s a similar story with revenue growth rates too. Roku beats Netflix again with a revenue increase of 55% CAGR, while Netflix trails with just 26%.
Is Roku Better Than Netflix?
Roku’s business model is platform agnostic. As such, the company can generate revenues from a far more diverse set of money streams than Netflix can.
For instance, Roku currently takes about 20% of all subscription fees from premium content on its platform, as well as charging for ad inventory and licensing contracts, and even raises cash from marketers using its OneView product when launching ad campaigns either on or off Roku’s various platform services.
Netflix, on the other hand, has just its recurring subscriptions from which to make money. Roku certainly has more of an economic moat than Netflix in this regard.
Even so, Netflix claims the largest share of the market with respect to its video streaming peers. At 29% of the pie, Netflix beats YouTube’s 21% share and Hulu’s 12%.
One point should be made here: Roku partly depends on its competitor’s continued success as a streaming business as it provides Netflix – and other major streaming outlets – as an option for its customers on the site’s platform.
In fact, should Roku lose the right to offer these popular names it would be a blow to its business. There’s a certain complementarity between Netflix and Roku in this sense, and there’s an asymmetry there as it mainly benefits only the latter.
Roku Vs Netflix: Pros & Cons
Let’s compare both companies as a value proposition to see which one offers a more attractive investment.
First, as mentioned earlier,Roku is a faster growing company than Netflix, both on subscriber count and revenue basis. This is because Netflix has most likely reached close to saturation point in the North America market – a market which accounts for its largest sales share and is its most profitable region.
And, while it’s true that Netflix is No. 1 when it comes to content – it produced nine out of the Top-10 most popular streaming series last year – the company is still desperate to cultivate new growth opportunities.
US subscriber growth is expected to drop to 3.6% and 1.7% in 2021 and 2022, respectively.
But this disparity between growth potential might already be locked in.
Roku’s 2021 Forward Price-to-Sales multiple is estimated at 18.28, whereas Netflix’s is much cheaper at 8.04.
The question becomes whether Roku’s predicted expansion has been overblown; the current Wall Street consensus has Roku’s next year revenue growth at nearly 46%. If it misses this goal, its high sales multiple could prove a problem.
Conversely, although Netflix offers less potential for growth than Roku, one positive catalyst could be on the horizon. The company has a history of issuing stock splits, such as it did in 2004 and 2015.
And although a stock split doesn’t alter the underlying value of a company, the practice is almost always considered a tailwind for a stock – a split will lower the price of an individual share, making purchasing a stock in the company more attractive to a general audience.
Tesla (TSLA) and Apple (AAPL) did it in 2020, and with Netflix’s share price inching up to the $700 mark when it last made the split (though it’s not there yet!), there’s reason to think that 2021 could be the year when it finally happens again.
Netflix Vs Roku Stock: Conclusion
As the world hopefully moves into a post-Covid reality this year, the tailwinds from the pandemic provided to streaming services such as Netflix and Roku will begin to abate.
Will Roku, with its greater growth potential and de-risked revenue model, cope with this change better than Netflix? Or will Netflix’s market dominance and household name carry it through?
Catalysts, both good and bad, could radically alter the fortunes of either company. But despite this, Roku and Netflix are still two of the best bets in the streaming service space.
And streaming to TV now represents over a 20% share of the weekly US TV screen time market. That will only go up in the future. Getting into Roku or Netflix now will likely not be a mistake.
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Better Buy: Netflix vs. Roku
More viewers cut the cord last year, and the number of pay-TV households in the United States dropped by 7.5%, according to eMarketer. That trend has translated into big success for companies like Netflix(NASDAQ:NFLX) and Roku(NASDAQ:ROKU), and it's made many shareholders rich in the process.
Going forward, both companies should continue to benefit as streaming content replaces linear TV. But which stock stands to benefit more?
Roku: The leading streaming platform
Roku's platform has become increasingly valuable as the number of streaming services has multiplied. By aggregating content from multiple services, Roku simplifies life for consumers, allowing them to access and manage all their streaming services from one location -- that includes both ad-supported products like Walt Disney-controlled Hulu and subscription products like Netflix. This allows Roku to earn revenue in a few different ways.
Image source: Getty Images.
For premium content, Roku takes a cut of all subscription fees paid through its platform, typically 20%. For ad-supported content, Roku charges marketers for use of its OneView ad tech platform, which allows ad buyers to launch campaigns both on and off the Roku platform.
Additionally, the company sells ad inventory from sources like The Roku Channel, helping it further monetize ad-supported content. Finally, Roku makes money by licensing its TV operating system to manufacturers, and through the sale of its streaming devices.
As a key part of its growth strategy, Roku has focused on driving consumer engagement. To that end, it made deals last year that brought WarnerMedia's HBO Max (owned by AT&T) and NBCUniversal's Peacock (owned by Comcast) to its platform, giving subscribers access to series like Game of Thrones and Parks and Recreation, as well as upcoming theatrical releases like The Matrix 4 and The Suicide Squad.
In general, this strategy creates a flywheel that drives monetization: As Roku adds content, more consumers should join, and as more consumers join, marketers should spend more money on Roku's platform. So far, that dynamic has translated into turbocharged growth for Roku.
Data source: Roku SEC filings. CAGR: compound annual growth rate.
Despite past success, 74% of U.S. households with a TV still pay for live services like cable or satellite, according to Leichtman Research Group. As a result, a large portion of marketing budgets are still allocated to traditional TV. But as more users cut the cord in the coming years, those dollars should shift to streaming platforms. And as the most popular streaming platform in the United States, Roku is well-positioned to grow quickly and create value for shareholders.
Netflix: The leading streaming service
In 2007, Netflix pioneered the streaming industry, and it never looked back. Today, the company operates in over 190 countries, and it's still the clear leader. In fact, Netflix has twice as many subscribers as the second most popular streaming service, Disney's recently launched Disney+.
As a part of its growth strategy, Netflix has invested aggressively in acquiring and developing content. In 2020, the company spent $12.5 billion on content assets, which is actually down from $14.6 billion in the prior year. And all that cash has helped Netflix differentiate itself from rivals: Last year, according to Nielsen, Netflix owned nine of the top 10 original streaming series, and all the top 10 acquired streaming series.
There's a saying in the media industry: Content is king. And Netflix certainly wears the crown. The company's investments have paid off in a big way, driving consistently strong subscriber growth. Moreover, Netflix's growing library of engaging content has translated into pricing power. The average monthly revenue per subscriber has trended upward over time, jumping from $10.31 in 2018 to $10.91 in 2020.
The compounding effect of Netflix's expanding user base coupled with increasing subscription fees has translated into strong top-line growth.
Data source: Netflix SEC filings.
North America is Netflix's largest and most profitable market. The company ended the year with 74 million paid memberships in the U.S. and Canada, up 9% from 2019. But Netflix may be nearing saturation in this geography. According to eMarketer, U.S. video subscription revenue will grow only 3.6% in 2021 and 1.7% in 2022.
Going forward, investors should pay attention to Netflix's ability to add new subscribers in other geographies, as well as its ability to raise prices over time. Those two variables are the core drivers of the company's growth.
For what it's worth, I like both of these tech companies. Netflix and Roku have claimed the top spot in their respective markets, and both should benefit as cord cutting continues. Even so, I think Roku has the edge here.
In terms of valuation, Roku trades at a pricey 25 times sales, while Netflix trades at a more reasonable 9.8 times sales. But Roku's business is growing faster, which helps justify the discrepancy. Moreover, Roku has positioned itself as an important player in the massive digital ad market, which gives the company (and investors) more upside potential in my opinion.
For instance, U.S. connected TV ad spend was roughly $8.1 billion in 2020, according to eMarketer. That represents only 13% of the $60 billion spent on U.S. TV ads last year. That gives Roku a lot of room to grow, even in the United States.
Better Streaming Stock: Netflix vs. Roku
Netflix(NASDAQ:NFLX) and Roku(NASDAQ:ROKU) are two of the market's top streaming media stocks. Netflix boasts the top streaming video platform in the world in terms of paid subscribers, while Roku is the market leader in streaming media devices in North America.
Netflix was actually an early investor in Roku. Roku's founder, Anthony Wood, previously worked at Netflix, where he led the development of a set-top box for its streaming platform. But Wood subsequently left Netflix and led Roku's development of its own set-top box, and the rest is history.
Image source: Getty Images
Netflix and Roku are both benefiting from the slow death of "linear TV" services like cable and satellite TV and the rise of on-demand streaming services. Netflix launched its first streaming video platform in 2007, and its stock has skyrocketed a whopping 21,430% over the past 14 years. Roku went public in 2017, and its stock has already risen roughly 2,290% from its IPO price of $14.
However, both companies also face a growing number of competitors. Netflix needs to deal with Disney(NYSE:DIS) and other rapidly growing streaming platforms, while Roku faces intense competition from Amazon(NASDAQ:AMZN) and other tech giants in the crowded streaming device market.
Is either of these streaming stocks still worth buying today? Let's compare their core businesses, growth rates, and valuations to find out.
How fast is Netflix growing?
Netflix generates nearly all of its revenue from paid subscriptions. Its total revenue rose 24% to $25 billion in 2020, and paid subscribers grew 22% to 203.7 million. Its net income increased 48% to $2.8 billion.
Netflix generated robust growth throughout the pandemic as people stayed at home and streamed more content. Postponed projects and reduced marketing expenses throughout the crisis also boosted Netflix's operating margin from 12.9% in 2019 to 18.3% in 2020.
In the first half of 2021, Netflix's revenue increased 22% year over year to $14.5 billion. Its number of paid subscribers rose 8% to 209.2 million, which exceeded its own guidance but sparked some concerns about a post-pandemic slowdown and competition from Disney -- which ended its latest quarter with nearly 174 million streaming subscribers on Disney+, ESPN+, and Hulu.
On the bright side, Netflix's operating margin still rose from 19.4% to 26.2%, and its net income surged 114% to $3.1 billion. That expansion can partly be attributed to its tighter spending on new content.
Netflix aims to keep its annual revenue growth at about 20%, but analysts expect its revenue to rise just 19% this year and 15% next year. They expect its earnings to jump 72% this year but improve just 23% next year, presumably as it ramps up its spending on new shows and movies again.
How fast is Roku growing?
Roku generates most of its revenue and gross profits from its software platform -- which hosts its integrated ads, content partnerships, and ad-supported Roku Channel -- while the rest comes from its first-party hardware players. By expanding its higher-margin platform business, Roku can sell its streaming devices at much lower prices.
Roku's revenue rose 58% to $1.8 billion in 2020, and its active accounts increased 39% to 51.2 million. That growth can be attributed to stay-at-home trends during the pandemic, as well as the expansion of the Roku Channel -- which now includes Quibi's former shows -- as a free alternative to linear TV channels and paid streaming platforms like Netflix.
Roku ended the year with an operating loss, but its gross margin rose year over year from 43.9% to 45.4% as it expanded its platform business. Its adjusted EBITDA more than quadrupled to $150 million.
In the first half of 2021, Roku's revenue surged 80% year over year to $1.2 billion. Its active accounts increased 28% to 55.1 million, but a sequential drop in its streaming hours in the second quarter -- which Roku attributed to reopening trends -- spooked investors.
But Roku's gross margin still expanded from 42.5% to 54.5%, even as its hardware business struggled with component shortages, and it generated an adjusted EBITDA of $248 million, compared to a loss of $20 million in the first half of 2020. Analysts expect Roku's revenue to rise 60% this year and 37% next year. There are hopes that it will post its first adjusted profit this year, and for its earnings to rise 32% next year.
The valuations and verdict
Netflix trades at 46 times forward earnings and nine times this year's sales. Roku has a forward P/E ratio of nearly 200 (assuming it generates an adjusted profit this year) and trades at 16 times this year's sales.
Both companies face post-pandemic slowdowns, but Netflix is a more reasonably valued investment than Roku right now. Netflix's valuation seems to be depressed by competitive threats, but the world's top paid streaming video platform will likely maintain its lead after the pandemic ends.
Roku netflix vs
So you want to choose a new streaming service. You’ve heard of the streaming giant Netflix, but have you heard of the ever-increasing popularity of Roku? The founder of Roku, Anthony Wood, actually worked with Netflix on their very first forays into the streaming world. Let’s look at both streaming services to help you decide in the battle of Netflix vs Roku.
Netflix: it’s everywhere. Stream it on your phone, tablet, TV, and laptop. Most platforms integrate it, and it seems like most people have it too. But Netflix wasn’t always a streaming service – when it started in 1997, it was an online DVD rental service. Its main competitor wasn’t Amazon, but Blockbuster, a chain that now only has one single US store standing in Bend, Oregon. Blockbuster even offered to buy Netflix in 2000.
By 2007, Netflix had delivered its billionth DVD and had developed an online video-on-demand service that was far surpassing its earlier DVD delivery legacy. Starting with less than 1,000 shows available on their online platform, Netflix has since expanded to house over 4,000 films and 1,000 TV shows in the US alone. With over 180 million subscribers across 190 countries, Netflix memberships allow you to stream on up to 4 devices at the same time.
Netflix was also creating original content as early as 2006 with Indie films like Sherrybaby premiering at the Sundance Film Festival. Now Netflix has found its niche with the binge-watching, cult-following successes of shows like Stranger Things and 13 Reasons Why. From its wacky and watchable Netflix Original documentaries like Tiger King to epic films like the Irishman, Netflix has no end of original content to watch to your heart’s content.
Roku was born out of a shelved Netflix project. In 2007, Netflix was working on a set-top box that allowed Netflix to be streamed directly to TVs. However, Netflix thought this project was too risky as it might put off future investors, so they put an end to the idea. Instead, Roku TV founder Anthony Wood, who was working on the project at Netflix, started Roku, to launch these boxes without Netflix taking a risk.
Roku was born, as an affordable set-top box with the potential to be upgraded regularly with new channels. Roku has increased its visibility each year, with the addition of services like Apple TV, Amazon Prime, and of course, Netflix. Now, Roku services are available from a streaming device, which you plug into your TV, connect online, and go. With over 4,000 free and paid channels, Roku’s biggest selling point is the price. Once you’ve bought your plug-in, you can stream free TV without a monthly subscription, and add payment details for potential rentals and purchases.
As Roku is much younger than Netflix (it was born from Netflix, after all), it is only just allegedly embarking on its original content journey. It has, however, expanded with its very own Roku TV, putting it ahead in one aspect of the Netflix vs Roku debate. Roku has seen a record-breaking expansion in 2020, with a new 3 million subscribers at the start of 2020 alone. It’s now home to almost 40 million Roku accounts and over 13 billion streaming hours worldwide.
|Pricing and Plans||Device Support||Pros and Cons||Top Shows and Movies||Number of Streams||Special Features|
Pricing and plans
The three Netflix plans range from basic to premium but they all provide the same extensive catalog for its viewers to enjoy. Netflix is also fully compatible with all the screens you could want, from your phones to your TV and tablet.
- Basic Plan – $8.99 a month to watch on a single screen, at any time. The first month is entirely free, and you can cancel whenever you want.
- Standard Plan – $12.99 a month for all the benefits of the basic plan, with two screens, and glorious HD definition too.
- Premium Plan – $15.99 for streaming on up to four screens at a time and the ability to watch content in ultra HD.
With each new screen, you also gain the ability to add a new user profile to a single account. At any time from anywhere in the world, you can have access to your own fully customizable content list.
With Roku, you’re only paying for the streaming device, and the free content remains free without a subscription required.
Roku streaming devices include:
- The Roku Express ($29.99) – free after initial purchase with access to all channels, with remote and HDMI cable.
- The Roku Premiere ($39.99) – free after initial purchase with access to all channels, with 4K, HD, and HDR streaming available and a remote, and a premium HDMI cable.
- TheRoku Premiere+ ($84)– same as the premiere package with a more enhanced TV remote and 4x the wireless capabilities.
As an integrated platform, you can add your subscription services like Netflix or Amazon Prime and will only need to pay for any rental or paid movies. You could also purchase a Roku TV rather than the player, with prices varying depending on the manufacturer.
Number of streams
Pros and cons
No commercials. There’s nothing worse than watching your favourite TV show or movie and having an advert interrupt you part way through. With Netflix, you pay the monthly subscription and get immediate access to the content library.
Downloadable content. If you’re going on a long journey or commute on public transport which doesn’t have access to WiFi, it can be handy to have a collection of your favorite films or series downloaded onto your phone.
Various membership plans. Netflix understands that streaming isn’t ‘one size fits all’, so you can go with basic, standard or premium. If you’re on a modest budget, you can go for the basic plan. If you have a family and want to give them all access, you can stream Netflix on four screens at once with the Premium plan.
Content library varies according to location. You may be excited to read a news article revealing your favorite show or movie is now available on Netflix, only to discover it’s available for subscribers living in a different part of the world.
Rotating content. Because licensing deals expire, people run the risk of getting into a TV series or bookmarking a movie to watch later, then being disappointed to find that it’s been removed from the content library.
Data cap. If you don’t have unlimited data on your mobile phone or tablet while you’re using Netflix, you may find that the streaming service uses it all up rapidly.
Wide variety of content and versatility. You have a lot to choose from in terms of content. From classic movies to TV shows and even children’s programmes, there is something for everyone with Roku, especially with the possibility of adding your regular subscriptions.
The Roku Channel is free. Setting up a Roku account is free of charge, and so is The Roku Channel and all the content you get there. You can use the app to view it on your preferred device.
There is no monthly payment for Roku. With Roku devices, there is an upfront payment that you need to cover, but then if you do not choose to add any subscriptions, then you do not pay any more fees after that.
You still have to pay for the monthly subscriptions if you want them. Having the option to add subscriptions is a plus, but the fact that you still have to pay for them normally is less than ideal.
The free content available is limited. You do get free content with your account, which is great, but obviously, it is not too varied. You’re not exactly getting millions of blockbusters on The Roku Channel.
The free content is outdated. There are not too many blockbusters, and some of the titles are simply old. A lot of the content available is outdated or merely a little “tired”. Don’t expect the latest titles to show up here like they do on Netflix.
Top TV shows, genres and channels
Netflix has undoubtedly boomed in the past five years due to its ability to cultivate cult-followings. From Stranger Things to The Stranger, here’s the top 5 in original content from Netflix.
In 1983, in the town of Hawkins, Indiana, strange things began happening. It starts with a missing boy, a sinister creature, and a rag-tag group of kids determined to find their friend. By the end of Season 3, you’re questioning everything and teetering on the edge of every cliff-hanging episode. If you’re not anxiously awaiting the next season, we recommend you jump into the addictive show.
13 Reasons Why
In this heartbreaking, heart-rending and heart-warming show, high school student Clay Jensen comes to terms with the death of his friend Hannah Baker. The voice of Hannah tells a torrid tale of bullying and abuse, and the trail she lays down explores how these ultimately led to her death. Unique in its portrayal of Hannah, this show has a new angle ready for every season.
Netflix has this unique ability to take on old classics and make them into a popular Netflix Original. Queer Eye is good for your soul, as the Fab Five (a new five compared with the 2003 original) travel across the US, helping people reboot their lives. From celebrating culture to rediscovering what makes you happy, QE is the perfect show to binge-watch if you’re feeling down.
Netflix True Crime
We’re all on the edge of our seats every time another true crime documentary comes along on Netflix. From the one that spearheaded it all, Making a Murderer, to spin-off true-story dramas like Mindhunter, you can’t help but watch them all. Try the baffling mystery of The Staircase, hard-hitting The Keepers, or even the quasi-crime, hilarious rollercoaster that is Tiger King.
Netflix went into the Oscars with 24 nominations. The Irishman alone was nominated for 10. The Irishman is undoubtedly an epic, as are the ground-breaking changes the Catholic Church saw in the Two Popes. We’re keen to see what Netflix does next, as their latest releases (like Marriage Story) go deep into lives pushed to the darkest extremes.
Roku’s 500 apps easily make it a platform of endless browsability. You can stream over 10,000 free films from the platform, with content that is updated regularly to ensure you can watch all your favorite films and shows.
The Roku Channel
The Roku Channel is exclusive to Roku and allows you to watch thousands of free films, sports, and shows. The Roku Channel also allows you to add premium subscriptions for HBO, Showtime, and Starz (a US-only feature). In the US you can also add a subscription to Kids & Family as part of your Roku Channel experience if you’re not sure what to watch on a rainy afternoon.
FilmRise Free TV
Over 10,000 free films and TV shows on one channel alone. The content changes daily, too, so you won’t be stuck for new content. You can find anything from 21 Jump Street to Hell’s Kitchen with this one-stop-shop of binge-worthy content.
From your hilarious classics like ‘Whose Line Is It Anyway?’ to popular shows like Pushing Daisies and Everybody Hates Chris, the CW Seed channel is a free channel that allows you to browse the modern classics without a login or subscription required.
There’s a whole channel for people that love food. Conde Nast Entertainment brings you everything with its food-focused programs, from BBQs to bake-offs and gourmet food. Enjoy everything that cuisine has to offer without having to pay a penny on Roku.
Pluto TV is entirely free and all-encompassing in its genres, films, and TV shows. There’s Pluto TV Movies, Pluto TV Drama, Pluto TV Sports, Pluto TV Food, and then your classics like Ghost Dimension and FBI Files. Thousands of free films and shows all in one handy place.
Netflix add ons are revolutionizing the way people use Netflix. For some work-related fun, you can use Netflix Hangouts to make it look like you’re on a conference call while watching some of your favorite films. You can also have a Netflix Party to socialize with friends from the comfort of your own home. There are even some Netflix secret codes to help you access hidden channels like your family-friendly Christmas films. From monitoring how long you spend on Netflix to learning another language, Netflix add ons and codes are a free way to tailor and optimize your Netflix experience.
Roku also has some secret codes that allow you to make the most of their ‘hidden’ free channels (like the Nowhere Man site for access to PBS and Adult Swim content). Their best special feature is the Roku App, which enhances your remote and provides you with a tailored entertainment guide. It also allows you to stream your own videos and music on a Roku TV or your Roku device.
The best thing about Netflix is that you can watch exactly the same films and shows, regardless of the plan you pay. The pricing plans simply allow you to upgrade, depending on how many people are going to be watching. If you’re a couple with completely different tastes and an HD screen, the standard plan makes sense as you can split the cost for the joys of two fully customized catalogs. For a family or shared house, a premium plan makes perfect sense as you can simply share the price of watching on four devices at the same time.
With Roku, you can have both a Roku device and a Netflix subscription. Once you’ve paid the initial cost of the Roku device, you can add most of your existing subscriptions to the platform. It isn’t really an either-or scenario. Roku’s biggest value for money is that if you’re not interested in subscriptions, you only pay one payment for the lifespan of your Roku device and enjoy the free content. In terms of Roku’s pricing plans, as an upfront cost, these make logical sense. If you want to stream 4K and HD movies, the Premier plan is only $10 more than the Express, and if you’re in the market for a wider wireless range and a more functional remote, for an additional $10 you can upgrade from Premier with Premier+.
Netflix has poured thousands into its design and the user experience, and the Netflix app can be updated multiple times in one week to improve usability. There’s even a Netflix Classic add-on if you’re missing the Netflix experience from its early years. Netflix curates its own recommended content lists for you, and you can search by genre as well as titles to find the right batch of binge-worthy shows for you.
The app is very intuitive and arranges its content very much like you’d find its old DVD content, in organized lists of cover-style thumbnails like trending content, Netflix Originals and a Top 10 to entice your interest. The design is pretty standardized across all devices, except for interactive content. The features of this content type are only available on newer devices and Smart TVs.
Roku’s streaming platform is no-nonsense, straightforward, and easy to use. It allows you to sort your apps, with a handy side panel to navigate between TV shows and films. It comes into its own with the search query functionality, as you can search for titles across specific channels, finding the free version and best-value subscription or rental options across all your channels and services in one go. You can pay more for an enhanced remote or type the searches you want into your phone or tablet.
Which service is better?
If you’re looking for original content, Netflix is the indisputable winner – Roku hasn’t even entered the market yet. Netflix also leads with accessibility, as it is watchable on any device virtually worldwide. However, Roku holds its own in terms of cost, as after a one-off purchase you can host all your subscription services and over 10,000 free films and TV shows all in one place. It’s also younger than Netflix, so it’s undoubtedly one to watch as it continually enters into new deals and improves its offering.
It’s not really a battle, as Roku and Netflix currently do two slightly different things. Roku hosts all your subscription services and free channels on one platform, for a one-off fee, while Netflix is offering streaming services across multiple devices. We want to make a case for buying both – get a Netflix subscription and host it on your Roku device for the best of both worlds.
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In the video streaming market, content is king and consumers are consuming it like never before. As a result, many viewers are cutting the cord on pay-TV and switching to content streaming.
However, according to Nielsen data, streaming represents just 27% of television screen time in the U.S., while linear television represents 63%.
Let us compare two streaming companies: a TV streaming one, Roku, to an online streaming one, Netflix, using the TipRanks Stock Comparison tool, and see how Wall Street analysts feel about these stocks.
Roku (NASDAQ: ROKU)
Roku has aimed to be a streaming platform that connects viewers, content publishers, and advertisers. The company generates revenues through the sale of digital advertising, content distribution, and sale of its streaming players.
Last week, the company announced its Q2 results with net revenues of $645.1 million, up 81% year-over-year and exceeding analysts’ expectations of $618.54 million. Earnings per share came in at $0.52, compared to a loss of $0.35 per share in the same period of last year. Analysts were expecting an EPS of $0.12.
However, Roku’s Q2 results prompted Wells Fargo analyst Steven Cahall to modestly lower the price target from $519 to $488 (22.7% upside), while keeping his Buy rating on the stock. Cahall pointed out that the company’s net additions of active users and streaming hours seem to be decelerating.
In Q2, Roku’s active accounts rose by 1.5 million, with 55.1 million active accounts at the end of the quarter. According to Cahall, this was still below Street expectations of net additions of 2 million.
Furthermore, the analyst added that while the Street was anticipating streaming of 19.4 billion hours in Q2, users streamed 17.4 billion hours, a miss of 12%.
Callahan is of the opinion that net additions are the stock’s “biggest lever” and the deceleration in the net additions “is likely to cause investors to stop and reassess the potential bull/bear [bull or bear case scenario].”
Still, Roku’s Average Revenue Per User (ARPU) is on an upswing and was $36.46 as of June 30, a jump of 46% year-over-year. Callahan views this positively because of multiple positive developments that underpin the bull case. (See Roku stock chart on TipRanks)
These include a shift from subscriber video-on-demand (SVOD) to advertising video on demand (AVOD), better cost per thousand impressions (CPMs, or the price of 1,000 advertisement views on a web page), and more clients from advertising “(both self-serve and upfront participants) due to the growth in CTV [connected TV] and decline of linear impressions.”
Roku’s focus on advertising revenues has been sharpened further through the acquisition of Nielsen’s (NLSN) Advanced Video Advertising (AVA) business for an undisclosed sum earlier this year.
For analyst Cahall, the reason for the upside on the stock has been a combination of hours watched per user and the expansion of CPM. The analyst added, “ARPU growth continues to impress though, with upside in hours per account per day, monetization per hour, CPMs, and ultimately profits. We think the ARPU story will win the day hence our continued bullish stance (and higher estimates).”
Notably, Roku is looking at increasing the streaming hours by focusing on content. Recently, the company announced 23 original shows that will premiere on the Roku Channel, starting on August 13.
In Q3, Roku has projected revenues of $680 million at the midpoint with adjusted EBITDA of $65 million.
Turning to the rest of the Street, consensus is that Roku is a Strong Buy, based on 13 Buys and 1 Sell. The average Roku price target of $504.86 implies an approximately 33.1% upside potential from current levels.
Netflix (NASDAQ: NFLX)
Late last month, Netflix reported its Q2 results. Revenues were up 19% year-over-year to $7.34 billion, versus analysts’ estimates of $7.32 billion. Diluted EPS came in at $2.97, missing the Street estimate of $3.15. In Q2 of last year, diluted EPS came in at $1.59.
The company finished the quarter with 209 million paid memberships with global net additions of 1.54 million paid members in the second quarter. NFLX said in its letter to shareholders, “COVID has created some lumpiness in our membership growth (higher growth in 2020, slower growth this year), which is working its way through.”
In Q3, NFLX has projected revenues of $7.47 billion with an operating margin of 20.7%. Diluted EPS is expected to come in at $2.55 with global paid memberships of 212.68 million, a rise of 9% year-over-year.
However, post the company’s Q2 results, Pivotal Research Group’s Jeffrey Wlodarczak modestly reduced the target price from $720 to $700 (35.7% upside) but reiterated a Buy rating on the stock. The reason for the lowering of the price target was the forecast for Q3 subscriber additions being less than expected.
NFLX has forecast Q3 net additions of 3.5 million while Wlodarczak’s Q3 estimate was of 4.5 million net adds. This has led the analyst to reduce the subscriber forecasts for the second half of the year and beyond, but to increase the estimate for NFLX’s expenses, as the company has forayed into gaming.
Last month, the company announced that Mike Verdu will join Netflix as VP of game development and will report to COO Greg Peters. According to a Bloomberg report, Verdu was earlier Facebook’s (FB) VP in charge of bringing games and other content to Oculus, FB’s virtual reality (VR) headsets.
Indeed, at NFLX’s earnings call, when asked about the company’s key hires in gaming, management replied, “Video gaming, we're pushing on that, and that will be part of our service, so unscripted, all those things. So think of that as making the core service [video streaming] better. So lots of investment but not a separate profit pool. It's enhancing the big service that we have.”
The company has also established a foothold in the e-commerce space by launching its first owned-and-operated online retail outlet, Netflix.shop, to sell products directly to consumers. (See Netflix stock chart on TipRanks)
According to analyst Wlodarczak, NFLX seems to be operating in a “virtuous cycle,” with the larger the subscriber base and higher the Average Revenue Per User (ARPU), the higher the company’s original content spend. That, in turn, “increases the potential target market for their service (and reduces existing subscriber churn) + enhances their ability to take future price increases.”
Turning to the rest of the Street, consensus is that Netflix is a Moderate Buy, based on 20 Buys, 7 Holds, and 3 Sells. The average Netflix price target of $602.23 implies an approximately 16.7% upside potential from current levels.
It is important to note here that effectively, both Netflix and Roku are competing for consumers' time and eyeballs through different strategies. While Roku is bringing in more original content to its streaming service, at the same time, it is also trying to enhance its advertising capabilities to drive higher CPMs.
In contrast, Netflix is also focusing on content but also seems to be eyeing gaming and e-commerce as potential enhancement of its core streaming service.
While analysts are bullish about Roku, they are cautiously optimistic about Netflix. Based on the upside potential over the next 12 months, Roku seems to be a better Buy.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities
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