Does Roku's Place As Streaming Market Leader Make It A Buy?

Roku Inc ROKU's less than stellar performance since its initial public offering has many investors asking if the company's leadership in the streaming video market makes it a compelling buy despite a rough trading debut.

There is little doubt that the future of television and video will be streaming-based, and consumers will demand a wide selection of products to suit their needs, Citi's Mark May and Mark Kelley said in an initiation report. Roku has established itself as being an established leader that faces competitive threats from tech behemoths like Apple Inc. AAPL and Alphabet Inc GOOG GOOGL, which certainly bodes well for the longer-term outlook.

The industry as a whole continues to benefit from content producers that are opting to deliver programming to consumers that are only available through streaming platforms.

Nevertheless, May and Kelley initiate coverage of Roku's stock with a Neutral rating and $24 price target. The absence of a bullish rating despite a bullish outlook for the company's strong position in a growing market is attributed to the stock's performance so far, the analysts said.

"We view the near-term upside as limited given the stock's performance since the IPO," the analysts wrote.

At publication, shares of Roku were down 4.62 percent at $20.86.

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Cramer On Roku's IPO _________ Image Credit: By Mattnad (Own work) [CC BY-SA 3.0 (https://creativecommons.org/licenses/by-sa/3.0) or GFDL (http://www.gnu.org/copyleft/fdl.html)], via Wikimedia Commons