Roku vs. Netflix: Which Stock is a Better Buy?

Roku vs. Netflix: Which Stock is a Better Buy?

Posted On November 13, 2020 2:52 pm

Roku, Inc. (ROKU) and Netflix, Inc. (NFLX), two of the prominent players in the streaming TV industry, have been thriving because of robust growth in the demand for entertainment content amid the pandemic. School closures, shelter-in-place guidelines, and unemployment have given people more time to engage in social viewing.

Both stocks generated significant returns over the past three years. While ROKU returned 552.6% over this period, NFLX has gained 150.1%. In terms of year-to-date performance, ROKU is a clear winner with a 72.8% return versus NFLX’s 51.7% gain. But which of these stocks is a better pick now? Let’s find out.

Business Structure and Latest Movements  

ROKU offers streaming devices for delivering entertainment to the television platform. The company also offers a Roku software developer kit that enables developers to build a channel that streams their content to the TV. It also provides advertising products and licenses under the Roku TV name.

The stock has been largely benefitting from the pandemic due to robust demand for TV streaming products, the expansion of partnerships for content distribution, and accelerating active account growth. The ROKU platform has over 46 million active accounts, and the company is witnessing strong sales of players and Roku TV models in both the United States and in international markets.

ROKU has recently added Apple (AAPL) Airplay to 4K devices, which gives users a new workaround to stream HBO Max and other mobile apps. In October, ROKU introduced the all-new Roku Ultra and unveiled the Roku Streambar for streamers looking to add powerful streaming and premium sound to any TV. On the software side, ROKU rolled out Roku OS 9.4 that offers customers new ways to access content quickly with a range of performance enhancements.

NFLX is widely known as the streaming giant due to its dominance in the industry. Similar to ROKU, it offers streaming services and engages in the internet delivery of TV shows and movies directly on TVs, computers, and mobile devices in the United States and internationally. The platform has over 195 million global paid members.

The company’s focus on creating original content has been one of the key drivers of subscriber growth over the last decade. NFLX caters to a wide range of users and has invested heavily in developing content. Consequently, the company continues to invest heavily in local language content as part of its international expansion. However, the company has been facing a potential shortage of films and movies as production remained suspended during the first half of this year.

Recent Financial Results

In the third quarter that ended September 2020, ROKU’s total net revenue…

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