How To Buy Roku Stock
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how to buy roku stock
After losing 87% of its value since mid-2021, the stock of Roku (ROKU 5.46%) has been on fire so far this year, with shares up roughly 56%. It's clear that investors felt the stock had simply fallen too far too fast, and a recovery is no doubt on the horizon.
But given the stock's rapid ascent in such a short time, investors are left with a dilemma. Roku faces a very different world than just a few years ago, which has many wondering if the rebound so far this year is sustainable, or if the gravy train has run out of track. Let's look at the ongoing situation to see if Roku stock is still a buy.
The prevailing headwinds spooked fair-weather investors, who have taken their eye off the vast and ongoing opportunity, instead focusing on the near-term challenges. A quick review of the landscape, however, suggests that Roku stock could reach greater heights.
Even in the face of this massive and ongoing opportunity, some investors will still hesitate to buy Roku, because it has rarely been cheap when measured using traditional valuation metrics. The stock is currently selling for 2.3 times next year's expected sales, when most experts agree a reasonable price-to-sales ratio is between 1 and 2.
Founded in 2002, Roku has transformed the way we watch TV with its affordable digital streaming devices. It currently has 40 million active monthly users. Roku went public on September 28, 2017, on NASDAQ (ticker symbol ROKU). Despite some volatility, Roku stock has generated impressive returns.
There are two types of orders you can execute to place your trade:Market order: Execute the transaction now at the current market price.Limit order: Set a specific price at which you wish to buy. This gives investors more control. But if the stock never hits the price you set, the trade will never be executed.
How much risk can you afford? Remember that stocks can be volatile, some sectors more so than others. Despite Roku's impressive gains since its public debut, it has been quite volatile. So it's best if you can commit to holding your investment for a few years to ride out any downturns.
Annual report: Details the company's financial performance, including income and cash flow statements, revenue, and expenses. Most companies will have this for free on their website.Quarterly financial statementsProfit margin (%): How much profit the company gains for every dollar in sales. The higher number, the better.Return on equity (%): How much profit the company generates with each $1 of the shareholders' money. The higher number, the better.Price-earnings ratio (P/E): The company's current stock share price to the company's average earnings per share. Usually, a higher P/E ratio means investors are expecting higher growth.Debt-equity ratio (D/E): How much debt the company has compared to its shareholder equity. Usually, a higher ratio means more risk to investors. But you have to consider the industry.
In other words, don't put all your money in just Roku stock. Instead, spread out your investments into many different stocks. That way, if Roku's price falls, you'll still have others to carry you through. It's recommended you have 10-20 stocks in your portfolio for diversification.
It's also smart to invest in stocks in different sectors. Roku is in the Communication Services sector, which may experience more volatility. To spread out risk, also buy shares of stocks in other sectors like Financial, Healthcare, Technology, etc.
If you're investing for the long term, another strategy is dollar cost averaging. This is when you spread your stock purchases over set intervals (say once a month), instead of buying in one huge lump sum at once. Sometimes you'll buy when the price is lower, and sometimes when the price is higher. This reduces the impact from the market volatility.
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Technology stocks have been hammered over the past year and Roku (ROKU 5.46%) is no exception. The video-streaming platform's stock is down 77% in 2022 and a recent pullback in digital advertising spending wreaked havoc on the company in the third quarter.
I'm still bullish on Roku for all of the reasons mentioned above. And I'll add that with the company's stock now trading at just 2.7 times its sales -- compared to its P/S ratio of 12 this time last year -- Roku's shares are looking pretty cheap.
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The problem here is that the share price could fluctuate. A few pennies one way or another may not matter to many traders, but you should be aware of the potential for a price swing. When a stock is very stable and traded often, like a blue-chip company, the difference is usually minimal, but not always.
In some cases, such as when volatility is high, there is breaking news, or a stock is not often traded, the actual price you pay for a stock could be significantly different from the price you saw when you submitted your order. To prevent this from happening, place a limit order.
Roku (ROKU (opens in new tab), $56.88) reported third-quarter earnings earlier this month. The initial reaction from investors sent its shares down nearly 6%. However, since its Nov. 9 low of $47.31, ROKU stock has bounced more than 20%.
The main reason behind Roku stock's big rebound is a rally in the broader equities market, sparked by hope that a recent cooldown in inflation could have the Fed easing back on rate hikes. In particular, beaten-down growth stocks were in favor earlier this month, with the tech-heavy Nasdaq up more than 5% since the Nov. 8 close, compared to the S&P 500's 3.4% gain.
Oppenheimer analyst Jason Helfstein (Outperform, the equivalent of a Buy) says that while ROKU stock "continues to frustrate investors," the hiring of Collier creates a "pivotal juncture" for the streaming company. Without getting into the weeds, Helfstein believes third-party demand-side platforms, under Collier's leadership, could be able to bid on The Roku Channel ad inventories in the future.
Not everyone is as optimistic as Helfstein, though. "With macro uncertainty for the ad market & the competitive nature of operating system and consumer hardware space, we take a more conservative view," says Jefferies analyst Andrew Uerkwitz, who initiated coverage on ROKU stock with a Hold rating and $45 price target in mid-November. Uerkwitz believes the streaming platform's ad monetization is under pressure and likely to fall in the coming months.
On one hand, they might want to sit on the sidelines as the streaming giant braces for a slowdown in near-term advertising spending. On the other hand, Roku stock may be cheap enough for some investors to bite, especially after the company made key management changes in recent months that should position it for future growth. Indeed, following its 75% year-to-date decline, ROKU stock is now trading at a price-to-sales multiple of 2.5, well below its five-year average of 12.5.
Streaming video platform Roku (ROKU) is the on-ramp to internet television for many consumers. But investors have soured on streaming video stocks amid slowing growth. Still, some people might be wondering: Is Roku stock a buy right now?
Today Roku gets most of its revenue selling advertising on its platform, including commercials for ad-supported services such as its own Roku Channel. Plus, it takes a share of pay-per-view and subscription revenue from third-party services sold through its platform. Roku stock is seen tied to the shift of television ad dollars to streaming from traditional broadcast and cable services.
Meanwhile, Roku stock ranks eighth out of 23 stocks in IBD's Leisure-Movies & Related industry group, according to IBD Stock Checkup. Its IBD Composite Rating is a poor 17 out of 99. The best growth stocks have a Composite Rating of 90 or better.
On July 23, 2021, Roku stock broke out of a cup-with-handle base at a buy point of 463.09, according to IBD MarketSmith charts. It surged to an all-time high of 490.76 four days later before turning south. 041b061a72