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.
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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