Roku Stock: Latest Move Only Raises More Questions

Just when you think you have figured out Roku (NASDAQ:ROKU)… they go and do something unexpected.

Recently the tech company raised some industry eyebrows when it hired Charlie Collier as its new head of media. Collier, a longtime industry veteran, had previously been running the FOX network after a successful stint toplining AMC.

And now he’s coming to Roku.

Yes, let that sink in because it’s not the type of move you just gloss over and forget.

Collier helped launch Mad Men, Breaking Bad, The Walking Dead and The Masked Singer – so yes, he has some experience in TV. The question though becomes what exactly is Roku’s game plan here and when will investors get clued in?

First as always some background.

Roku as a company saw a period of strong growth in 2020 and 2021 as did many in the streaming space due to COVID-induced lockdowns. And as many are seeing now, those profits have started to subside and it’s causing some headaches.

With the world now again free to move about the cabin, streaming has started to slip and as we wait for it to stabilize we are seeing the pieces shifting in the industry.

For Roku’s shareholders it’s been an odd journey.

The company has sent numerous messages it wants to expand its streaming foot-print but nothing that has shown a clear roadmap. First it acquired the This Old House catalog, then it bought out Quibi’s inventory and then expanded more into originals by saving (temporarily) NBC’s Zoe’s Extraordinary Playlist and soon will release its Weird Al bio-pic with Daniel Radcliff in the lead.

Not exactly a group that has a lot in common, but each got the industry talking.

All in all the moves have been successful but while producing smoke, there’s been little fire – as one would assume is the goal for the company.

The Collier move though does come very close.

You don’t hire away an executive with this type of reputation and resume to have him lord over a languishing slate. No, this signals Roku is ready to make some moves, which begs the question of what does Roku know that we don’t? Or moreover, what does Roku THINK that it knows that we don’t?

And I say that because after your stock drops like a stone and the blame is put on “a significant slowdown in TV advertising,” it isn’t hard to see why some investors may be curious where their money is going.

While hardware has always been the backbone of Roku, it has grown in size and scope due to its advertising prowess. To get onto the hardware, streamers have to agree to cut Roku into some of their revenue, specifically (where applicable) from advertisements.

For HBO Max and Peacock, that arrangement kept them both off the platform for months post launch. While it has since been resolved, at the time it was a newsworthy and costly conundrum for all involved and it did have a negative impact on all three.

That alone should show you how competitive the space has become and we have reached the point where the fringe services are folding – not launching. In the past year, AT&T powered down its Audience Network and Spectrum pulled the plug on its originals, further tightening the pack.

Also notice I said fringe services, note this is very different from niche services, which survive and thrive because they have a clear direction that keep their subscriber bases happy. Fringe services don’t have that built-in luxury.

So with so many leaving, again that begs the question, what does Roku know – or think it knows – that we do not?

The answer is also a question. The move is likely a precursor to more, but what type?

Some have surmised that Roku could also be gearing up to make an acquisition.

After all, Collier is no stranger in the area.

Some may remember Roku also recently found itself as a possible takeover target with Netflix (NFLX). While the rumors of a Netflix/Roku marriage were fast and furious they were ultimately just rumors, but that doesn’t mean down the road new talks may spark up with other companies.

A Netflix acquisition was problematic from the start for a variety of reasons, chief among them the level of data Roku has tied to subscriber preferences among ALL the major platforms. Basically, imagine Disney+ (DIS) data ending up in Netflix’s hands or one service essentially buying ads for another. Those were all possibilities should a Netflix deal materialize and that’s why other similar deals seem equally as unlikely.

Not impossible, but challenging.

So that leaves programming and content as the main spark Roku is hoping for with Collier now on board and that tracks with its recent hire of ITV and Turner vet David Eilenberg, but how much and what type are both valid questions that continue to go unanswered.

The Collier hire is a refreshing sign that Roku indeed has a long-term vision. Of course, it will take some time for both men to make their impact and investors will give them time to show their hands. The problem is that these investors have been waiting a long time and now knowing they have to wait longer puts a shorter clock on their patience level.