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Why Roku Stock Surged Today

By Danny Vena - Oct 6, 2021 at 4:08PM

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A consumer survey paints a rosy picture for the streaming video pioneer.

What happened

Shares of Roku ( ROKU -2.24% ) climbed higher Wednesday, adding as much as 6.1%. At the close today, the stock was still up 5.6%.

A consumer study sponsored by the streaming platform suggests that Roku's opportunity is only just beginning.

So what

Roku announced the details of a study of consumer viewing behavior and preferences. The report, titled The Streaming Decade, was conducted by National Research Group on behalf of Roku. The study suggested that streaming video "has reached a tipping point," reporting that nearly 90% of consumers are TV streamers, compared to 70% who subscribe to traditional pay-TV services.

That's not all. Two-thirds of respondents (66%) said that when they "want to watch something everyone is talking about," they choose streaming options, compared to 23% who turn to pay TV.

A young couple cuddling on the couch watching television.

Image source: Getty Images.

The viewer demographics are also telling, as streaming is nearly universal among younger viewers. Among 18- to 24-year-olds, 93% identify as streamers. That number climbs to 94% among those 25 to 40 years old. What some might find surprising is that among those 41 to 56, 90% have streaming video subscriptions, though that slips to 77% for those 57 to 70.

It's been suggested that streaming video use would decline as the pandemic winds down, but the survey disputes that assumption. "More than half of consumers say they're going to watch as much TV as they did during the pandemic even as restrictions loosen," according to the report. 

It isn't just the U.S. that has embraced streaming. The study found that 80% of Canadians classify themselves as streamers, along with 90% in the U.K.

Now what

Roku makes the lion's share of its profits from advertising, controlling roughly 30% of all advertising that appears on its platform. The study also found that half of respondents have ad-supported streaming services and 21% of those have downgraded their pay-TV services during the preceding 12 months.

The company's platform revenue, which includes advertising, grew 117% year over year, and is up 217% since the second quarter of 2019, so this isn't just about weak comps.

This all seems to suggest that Roku has a long road ahead and isn't just a pandemic play after all.


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