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Should I watch Roku stock following Netflix’s disappointing earnings?

I’m going to try and look at the bright side of Netflix’s disastrous subscriber growth in Q1. 

Unfortunately, that bright side isn’t for Netflix (NASDAQ: NFLX), it’s for Roku (NASDAQ: ROKU)!

This article was originally written by MyWallSt. Read more market-beating insights from the MyWallSt team here.

 

Is Netflix’s loss Roku’s gain?

Let’s just get the ugly stuff out of the way; Netflix had a bad quarter in terms of subscriber growth, and that trend is set to continue. Its net subscriber additions came in at four million, well short of the more than six million predicted. To rub salt in investors’ wounds, management predicts that just one million new subscribers will be added in Q2 — its lowest forecast in years. 

This is good news for Roku because now, Netflix is genuinely facing stiff competition in the form of Disney+, Apple TV+, HBO Max, etc. The trend in recent years has lent credence to the belief that more streaming options will mean more streamers. Analysts estimate that there are roughly 2.5 billion over-the-top (OTT) streaming service subscribers worldwide as of the end of 2020. 

Considering the planet is rapidly approaching a population of 8 billion people and internet access is on the rise globally, it seems that OTT still has room to grow. 

In the middle of all that sits brand-agnostic Roku and its 51 million subscribers as of the end of 2020 — up by 14 million in just one year. For the first time, Netflix’s dominance looks vulnerable, and with so many players in the game, Roku will lap up users who want to enjoy all of their services in one neat little package. 

In fact, the loss of Netflix’s dominance is only good for streaming, and Roku stands to gain the most.

 

MyWallSt gives you access to over 100 market-beating stock picks and the research to back them up. Our analyst team posts daily insights, subscriber-only podcasts, and the headlines that move the market. Start your free trial now!

 

Disclaimer Past performance is not a reliable indicator of future results.

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

CMC Markets does not endorse or offer opinion on the trading strategies used by the author. Their trading strategies do not guarantee any return and CMC Markets shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein.

*Tax treatment depends on individual circumstances and can change or may differ in a jurisdiction other than the UK.

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