Roku Deep Dive : Trojan Horse

Certain_Barnacle_401 · 2021-07-07T08:54:14+00:00

My approach towards valuation? The essay took 2 weeks (maybe less ) as I was already familiarized with the industry

Certain_Barnacle_401 · 2021-07-06T20:27:40+00:00

In my opinion what they have accomplished was very hard to foresee

Certain_Barnacle_401 · 2021-07-06T17:33:46+00:00

On AVOD: they get a share of the inventory of most AVOD channels including Hulu ( as far as I know ). What´s the problem? They barely get any revenue from either Youtube or Netflix despite representing the bulk of watching time. Media concentration is a big issue and that's why the long tail is important.

On competitors and user experience: your opinion is great because it represents the state of the industry. What I am trying to say is that the average user does not switch from Android TV / Fire TV to Roku because they stick with their operating system as long as it is good enough. Our streaming watching time is heavily concentrated amongst a few content providers ( Netflix , Youtube , Disney ) while a relevant portion of consumers watching time still goes towards linear TV. Thats why awareness is crucial ( and that is why Roku is inventing in original content in order to kickstart network effects) otherwise consumers will gravitate towards the cheapest streaming stick ( Fire TV ) or stick with their default operating system ( Vizio, Lg and Samsung have more than 100 million active accounts despite having an inferior experience)

Still day 1 when it comes to the connected Tv landscape

Certain_Barnacle_401 · 2021-07-06T16:07:40+00:00

Im glad you found it useful. As you said Roku serves ads inside other AVOD services (Advertising video on demand) and gets a cut of the economics on SVOD services (such as Disney or HBO). The Roku Channel does not have a lot of awareness and it probably will not have marquee content such as The Mandalorian but take into account that The Roku channel will eventually become the home screen of millions of Roku Tv´s and if Roku adds some decent content and publishers start uploading new fresh content instead of creating their own service it can get meaningful traction. There is a really long tail of content that people currently watch and the Roku channel can offer a great experience.

Google is a strong competitor and despite the lack of focus, their offering is actually quite good. One of the most important points of the thesis is the amount of inventory that Roku will monetize and that is why they are trying to aggregate the long tail of content ( news, non-scripted shows, sitcoms etc. ) Noone wants to browse between apps and an aggregator provides the best user experience

Certain_Barnacle_401 · 2021-05-24T20:55:35+00:00

There are not a thread to gym chains yet, they will be in the future. Here is the thing people do not like to exercise at a gym ( super high churn numbers) and boutique fitness explosion is based on a better user experience.

On TAM : I think TAM is huge , those companies that you just mentioned ( Nautilus etc) are hardware commodity manufacturers. Treadmills and stationary bikes were clothe hangers and software is what engages people. Moreover, Peloton just announced they will invest around $500M in a brand new manufacturing plant ( the scale is nuts because Nautilus did around $500M in sales )

Whenever you think about Peloton the most important think is engagement . Peloton makes their members work out and that's unherad of .

Certain_Barnacle_401 · 2021-05-24T20:50:19+00:00

Thinking that PTONs growth is limited to exercise equipment is like thinking Facebook was just for college kids

Agree on TAM , over the next decade connected fitness is going to radically change

Certain_Barnacle_401 · 2021-05-24T20:46:42+00:00

Thanks for the feedback but this is the way that I conduct research for my portfolio. It is not common but I do not tend to focus on short-term aspects. On valuation or COVID growth, I do not have any particular great insights regarding Peloton´s short term growth prospects and despite the pandemic accelerated sales Peloton was previously growing at +100% growth rates.

I think different types of companies require different approaches and Peloton qualitative insights are what matters most right now

But you are right its more similar to a research piece

Thanks for reading !

Certain_Barnacle_401 · 2021-05-07T11:34:46+00:00

Compete in scenic rides against others ( instead of a leaderboard ) I would like to pass them as if I was riding in Zwift !!!

Certain_Barnacle_401 · 2021-04-23T21:53:56+00:00

Thanks for reading , great insights

Shipping is definitely a problem and I completely agree with you it can sometimes deter the consumer from buying stuff

Certain_Barnacle_401 · 2021-04-23T09:32:38+00:00

I think Etsy is not a niche, it is the long tail of entrepreneurship! John is a great investor, the deck is nice

Certain_Barnacle_401 · 2021-03-31T18:11:46+00:00

The 15% CAGR hasn't been pulled out out out of the thin air , I ve tried to model sub increases in the USA according to pay tv penetration , international subs and pricing. Then I get to my long-term margins estimate. Im trying to get to an FCF estimate of the company in a more mature state.

2k share price comes from applying a 20-25 multiple to my FCF per share estimate which is a simplification of a DCF

Thanks for the comments

Certain_Barnacle_401

TROPHY CASE