I received a rather lengthy e-mail yesterday from someone who was somehow desperately in love with his Roku. To say that he disagreed with my last article would be an understatement.
Disclaimer: I’ve never used a Roku in my life. I’ve never even seen a Roku in my life. I think the idea is dumb and that 2 years from now, it will either be bought for pennies on the dollar or simply disappear. It’s never been profitable and most likely never will be neither.
That being said, I have no idea if Roku is a good product. But it doesn’t matter because even if it was, a good product doesn’t make a company. It especially doesn’t make a $2.5B company.
People in general grossly underestimate how much money $2.5B is. In order to justify that kind of valuation, Roku would have to sell around $2.5B of its stuff per year and be profitable. Then, and only then could I possibly envision a valuation of that magnitude – but perhaps not even there.
Roku sells a fraction of that amount, has barely even grown in 15 years (how many people do you know with a Roku?) and is burning money at a rate that approaches Tesla’s, except they have nothing worthwhile coming out. Their product suck, can be copied by anyone and they are fighting against giant companies that are far more ubiquitous than its “Roku.” Overall, it’s like Fitbit, but worse. Period.
I’ll never understand why people invest in that kind of garbage anyway. Roku should be valued at $100M-$200M at most. Even at $200M, I wouldn’t invest in it.
So anyway, ROKU has crashed 20% since I recommended shorting it. The question is: is it still worth shorting it?
Answer: as long as it’s above $10, yes. This one is going straight down. Perhaps a small pause for christmas (“everyone will have a Roku in their Christmas tree!!! OMG!!”) but then it’s a freefall to a number close to its actual valuation, aka 0.
What a worthless piece of shit company, I can’t believe anyone even remotely thinks this is a fine company to own.