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Wall Street Obsesses Over Roku and Company's CFO Perfectly Explains Why

Roku has seen strong growth on the back of the streaming content revolution that also includes Netflix. Hence, it's no surprise Roku finally decided to go public.

Wall Street definitely tuned into Roku's (ROKU) - Get Roku, Inc. Class A Report initial day of trading. 

Shares of the streaming service skyrocketed as much as 30% in its first day of trading on Thursday as investors ignored competitive forces such as Alphabet's (GOOGL) - Get Alphabet Inc. Class A Report Chromecast and Amazon's  (AMZN) - Get Amazon.com, Inc. Report Fire stick. Earlier this week, Roku had priced its IPO at $14 per share, the high end of its range. At $17.75, the provider of streaming set-tops and HDMI sticks has an official valuation of about $1.7 billion, with that number rising higher after accounting for outstanding stock options and warrants.

While the company's debut benefited from investors looking for the next great tech IPO in a year of so few, there is indeed a growth story to Roku explained CFO Steve Louden in an interview with TheStreet. 

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Fueled by rapid cord-cutting, Roku's revenue rose 25% in 2016 and 23% during the first half of 2017 to $199.7 million. However, hardware sales fell 2% during the latter period to $117.3 million. Revenue growth stemmed entirely from a 91% increase in Roku's higher-margin "Platform" revenue. That business, which covers ad sales, software licensing, branded channel buttons on Roku remotes and revenue cuts on subscriptions and on-demand content purchased on Roku devices, increased to $82.4 million.

Roku isn't yet profitable, but has plans to get there quickly via a combination of selling ads on its platform and attracting more overall users, says Louden.

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