Roku streams TV channels, movies and digital content such as Netflix, YouTube and Prime. It enables consumers to cut the cord. People get Roku mainly when they buy new TVs, which has Roku pre-installed, or less frequently when they buy Roku devices.
I had suspicion that as more people lose their jobs, they would buy fewer TVs. I questioned the amount of money that advertisers would spend to advertise to people with no income and stuck at home. Consumers are not driving, taking vacations and going to restaurants.
However, Roku released information about their users’ viewing pattern:
The above announcement pertained to first quarter of the year, ending in March. Most of the “stay at home” orders will likely stay in effect until end of April or sometime in May. This will likely continue increasing usage of Roku.
I still think there is a possibility of a recession that lasts longer than what the stock market seems to indicate with this recent rally. If it does, it will have a material impact on Roku’s revenue. In which case, I might sell Roku again.
People should know that short term trades such as this are extremely difficult to make, and not recommended. There is a probability that this trade will become a losing trade. For most people, it’s better to buy and hold good businesses that will normalize in a few years and go on to new highs. Buy and hold is much easier than dealing with short term volatility. On the other hand, nobody knows if we will have a bear market and how long that lasts.