Roku's Investment Funds: Who's Backing The Streaming Giant?

Roku, Inc. is a consumer electronics and broadcast media company that provides a streaming platform for television. The company operates through two segments: Platform and Devices. The Platform segment includes digital advertising and related services, while the Devices segment involves the sale of streaming players, audio products, and smart home products. As of 2021, the top four mutual fund holders of Roku Inc. were: The ARK Innovation ETF (ARKK), Vanguard Total Market (VTSAX), Fidelity Growth Fund (FDGRX), and Vanguard Mid-Cap Fund (VIMAX). Roku has been graded as a potential investment opportunity based on its stock value, growth, and quality.

Roku's top four mutual fund holders

Rokus Top Four Mutual Fund Holders

The ARK Innovation ETF (ARKK)

The ARK Innovation ETF (ARKK) is the largest fund holder of ROKU, owning nearly 3.52 million shares, which have a market value of more than $1.22 billion as of May 28, 2021. This ETF includes stocks of disruptive innovators of technology-enabled products and services, with a focus on DNA technologies, fintech, industrial automation, and next-generation infrastructure services.

Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)

The Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) is the second-largest owner of ROKU shares, with over 3.10 million shares, valued at $1.075 billion as of April 30, 2021. This mutual fund offers investors exposure to the U.S. stock market, with approximately $1.2 trillion in assets under management. VTSAX has a five-year annualized return of 17.67% and a low expense ratio of 0.04%.

Fidelity Growth Company Fund (FDGRX)

The Fidelity Growth Fund is the third-largest mutual fund holder of ROKU, with more than 2.63 million shares, resulting in a market value of about $858 million as of March 31, 2021. The Fidelity Growth Company Fund (FDGRX) primarily invests in domestic and foreign common stocks that show potential for above-average growth, as measured by factors like earnings and revenue.

Vanguard Mid-Cap Index Fund Admiral Shares (VIMAX)

The Vanguard Mid-Cap Index Fund Admiral Shares (VIMAX) is the fourth-largest fund holder of ROKU stock, owning 1.07 million shares, which have a market value of nearly $368 million as of April 30, 2021. The VIMAX fund provides investors with access to a broad range of mid-sized U.S. equities, which can offer higher potential returns but also carry greater price volatility than larger companies.

These four mutual funds are significant holders of ROKU equity shares, reflecting their confidence in Roku, Inc.'s performance and growth potential.

Roku's revenue streams

The Platform Segment:

• Digital Advertising: Roku's primary revenue source is its unique advertising business. In its latest earnings report, Roku reported $755 million in platform revenue, including advertising. The company sells inventory to publishers, audience data access, display ads, and ads for its own channel. They are also pioneering "shoppable" ads, allowing viewers to purchase items directly from ads on their TV screens.
• Subscriptions and Transaction Revenue Share: Roku earns revenue by directing subscriptions to video services. If a viewer subscribes to a paid service like Netflix via Roku, Roku receives a portion of that revenue. They also launched a system allowing users to subscribe to paid channels and pay through a single bill.
• Remote Control Buttons: Roku generates revenue by selling branded channel buttons on remote controls.
• Licensing Arrangements: The company has licensing deals with TV brands and service operators.

The Devices Segment:

• Streaming Players and Accessories: Roku sells streaming players, audio products, smart home products, and accessories through retailers, distributors, and directly to customers via its website. Examples include streaming sticks and set-top boxes.
• Smart TVs: Roku licenses its operating system to smart TV manufacturers, allowing users to access streaming services directly through their TVs.

Roku's revenue model has been successful, with total revenues growing significantly from $399 million in 2016 to $1.78 billion in 2020. The company has added more than 14 million active users and has benefited from the rise in streaming services and cord-cutting trends. Roku's ability to integrate various streaming services into one platform, along with its advertising business, has contributed to its revenue growth.

Roku's stock value and growth

Roku, Inc. (ROKU) is a consumer electronics and broadcast media company that competes with giants like Amazon and Apple in the streaming business. The company went public in September 2017 with an IPO of $14 per share, and by 2021, the stock had soared to nearly $400 per share. Roku's stock value has experienced significant growth since its initial public offering. In 2020, the company surpassed 50 million active accounts, generating $1.78 billion in revenue and achieving two consecutive profitable quarters in Q3 and Q4.

However, Roku's stock performance has had its ups and downs. While it turned profitable in Q3 2020 due to its booming ad business, it posted a loss in the first quarter of 2024. The company's user growth has also slowed, with analysts expecting 1.7 million new user accounts in the first quarter, but Roku only added 1.1 million. On a year-over-year basis, active accounts rose 14%, marking the sixth consecutive quarter of decelerating growth.

Despite these challenges, Roku has been expanding its exclusive and original content for the Roku Channel, acquiring popular shows and ordering new seasons of existing ones. The company has also benefited from the launch of new streaming services such as Disney+ and Apple TV+, as well as partnerships with third-party streaming services.

As of 2021, the top four mutual fund holders of Roku, Inc. (ROKU) are:

• The ARK Innovation ETF (ARKK)
• Vanguard Total Market (VTSAX)
• Fidelity Growth Fund (FDGRX)
• Vanguard Mid-Cap Fund (VIMAX)

These investment funds have a significant stake in Roku and believe in its growth potential, especially as the company continues to innovate and expand its streaming platform.

Roku's competition

Roku's top competitors include Hulu, Caavo, and TiVo. These companies all operate within the entertainment industry, providing streaming services and devices to their customers.

Hulu is a premium streaming service that offers live and on-demand TV shows and movies, with both ad-supported and subscription-based plans. Caavo is a technology company that has developed a platform to unify home entertainment, connecting various devices to a single TV. TiVo, on the other hand, provides a unified experience for live, recorded, and streaming television, offering devices that allow users to access this content.

In addition to these direct competitors, Roku also faces indirect competition from streaming giants like Netflix, Amazon Prime Video, and Apple TV+. These services are available on Roku devices, but they also have their own streaming hardware, like Amazon Fire Stick and Apple TV.

Other competitors in the streaming device market include Chromecast, Amazon Fire Stick, and Apple TV. These devices offer seamless integration with their respective ecosystems, with Chromecast and Fire Stick providing more affordable options, and Apple TV catering to the higher end of the market.

Roku has gained popularity due to its versatility, user-friendly interface, and competitive pricing. It offers a wide range of content, including over 500,000 movies and TV episodes, as well as free channels and premium subscriptions. Its remote control is also a standout feature, with shortcut buttons and private listening capabilities.

While Roku has its strengths, it's important to note that the company's user growth has slowed, and it posted a loss in the first quarter of 2024. However, analysts still view Roku stock as a play on the trend towards "cord-cutters" and "cord-nevers", with potential for growth in the international market.

Roku's history and business model

Roku, Inc. is a consumer electronics and broadcast media company that was founded by Anthony Wood in 2002. Wood had previously founded ReplayTV, a DVR company that competed with TiVo. After ReplayTV's failure, Wood worked for Netflix, where he worked on Project:Griffin, a set-top box that would allow users to stream Netflix content to their TVs. However, just weeks before the launch of the project, Netflix's founder Reed Hastings killed the project. Netflix then decided to spin off the company, and Roku released their first set-top box in 2008.

In 2010, Roku began offering models with various capabilities, which eventually became their standard business model. Roku partnered with smart TV manufacturers in 2014 to produce TVs with built-in Roku functionality. In 2015, Roku won the inaugural Emmy for Television Enhancement Devices. As of 2024, Roku is the top streaming TV distributor in the U.S., reaching nearly 120 million people.

Roku operates through two main segments: the Platform segment and the Devices segment. The Platform segment includes digital advertising and related services, such as subscription and transaction revenue shares, media and entertainment promotional spending, and the sale of premium subscriptions. The Devices segment involves the sale of streaming players, audio products, smart home products, and accessories through retailers, distributors, and directly to customers through the company's website.

Roku has continued to innovate and expand its product offerings, releasing new generations of streaming players and partnering with companies like TCL, LG, Westinghouse, and Hisense to manufacture Roku-branded smart TVs. In 2020, Roku surpassed 50 million active accounts and generated $1.78 billion in revenue, demonstrating its success in the competitive streaming business.

Frequently asked questions