Roku (NASDAQ:ROKU) touched the $100 level in June only to re-test $90 by Jan. 1. But after Amazon.com (NASDAQ:AMZN) said it recorded strong Roku device sales on Amazon Prime day, bulls snapped up Roku stock. At 14.8 times sales and a $12-billion market cap, the stock is getting ahead of fundamentals. Even though the stock is expensive, strong subscription numbers are all that matter for this young firm.
Amazon.com sold a solid number of Roku sticks, probably because of the $10 - $34 price discount. Selling the streaming device at a possible loss is worth it for Amazon. The online retailer wants to drive unit sales for the event and get consumers on the Roku channel. With a bigger audience, chances are good that Roku users will eventually sign up for Amazon Prime.
Roku will of course benefit in the long-term with more viewers streaming on its device. The company may attract higher advertising revenue for its Roku Channel. This is a win for consumers, too, because Roku also becomes a viable alternative to Netflix.
Competition is heating up quickly in the streaming video space. Disney (NYSE:DIS) Plus launches later this year and AT&T (NYSE:T) is planning to offer three tiers of service. So, the sooner Roku bulks up its audience count, the better chance it has to survive.
