by Ian Harvey
August 12, 2019
Roku Inc (NASDAQ: ROKU) shares stumbled 10.5% on Tuesday after Apple unveiled its price for its Apple TV+ service; which was about half what was expected; then Wednesday recovers 3.90%, and another 3.04% after the market closed.
Options Traders make 65% potential profit with an Option Call, in 24 hours.
More profit expected so not too late to participate in the recovery!
A NICE POTENTIAL PROFIT FOR THE WEEK!
The Los Gatos, California-based TV streaming device giant Roku Inc. (NASDAQ: ROKU) saw its shares crash on Tuesday, sliding 10.5% by the time the market closed.
While some of this decline was likely due to a continued sell-off in many high-growth software stocks this week, there's another reason for the tech stock 's sharp drop on Tuesday; the competitive pricing of the new streaming service from Apple (NASDAQ: AAPL).
The Apple Deal…..
During Apple's annual September product launch, the company kicked off with details on its upcoming services - Apple Arcade and Apple TV+. Each service will cost $4.99 a month. Furthermore, these subscriptions will support up to six family members. Specifically, the Apple TV+ streaming-TV service will also be free for one year for any customers who purchase a new iPhone, iPad, Apple TV, iPod touch, or Mac.
Effect On Options Trade?
Actually, this was beneficial to option traders contemplating the options trade recommended on Tuesday by Stock Options Made Easy. This helped reduce the cost of the trade from $8.00 to $2.70.
On Wednesday, Roku Inc began to recover and the stock price climbed by $5.80 (3.90%); which pushed the option from $2.70 to $4.45; or a potential profit of 65%.
This recovery continued after hours with Roku Inc adding another 2.03% to its share price.
Roku Inc Should Continue To Benefit…..
Roku Inc benefits from growing competition in streaming TV. The Roku Inc primarily makes money from taking a share of subscriptions and ads from third-party streaming services on its platform.
Therefore, Roku Inc will get a share of Apple TV+ subscriptions on its platform, as Roku is one of the over-the-top streaming devices the service will be available on.
Roku Inc does have a streaming service called the Roku Channel, but this service is essentially an aggregator of ad-supported content and premium subscriptions to services like Apple TV+. Roku Inc does not make original content and thus doesn't sell subscriptions to any services with original content.
But, more affordable pricing for Apple TV+ will lead to more subscribers -- and ultimately more engagement -- on the Roku platform.
Another very important benefit is that the one-two launch of Apple TV+ and Disney+ in the first half of November will push more people to cut the cord. You can be sure that Roku Inc streaming players and third-party smart TVs powered by Roku's operating system will be among the biggest sellers in consumer electronics over the holidays.
So, a potential price war among the major streaming services actually benefits Roku Inc, as it drives more people to the platform.
Also, Roku's user base is largely concentrated in the United States today, but it has big plans to expand in Europe and other international markets. It's laying the groundwork this year, and it expects to start seeing results in 2020.
While Roku currently powers about one-third of all smart TVs sold in the United States, it commands just a 4% market share globally.
One analyst thinks Roku's international expansion could move fast. Roku could have 80 million active accounts by 2025, according to William Blair analyst Ralph Schackart. He also expects average revenue per user in the U.S. to climb to $58 that year. Roku last reported ARPU of $21.06.
What Can You Do?
If you thought you had missed-the-boat on this options trade, don’t despair! Expect Roku Inc to continue bouncing back, particularly based on analysts’ optimism for Roku, the positive earnings, upbeat guidance, and along with the other compelling factors already mentioned.
Therefore, if you agree with this scenario consider the following options trades…..
Buy the ROKU OCT 18 2019 160.000 CALL at approximately $7.10.
Or stay with the original trade…..
Buy the ROKU OCT 18 2019 170.000
CALL at approximately $4.30.
Or take a longer expiry date…..
Buy the ROKU NOV 15 2019 170.000 CALL at approximately $10.65.
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An Important Note: That any suggestions for options trade considerations require investors/traders to use their own discretion as to when to enter or exit! As well, it is advisable to do further research and due diligence before executing your trade.
It is sometimes best to exit a trade, if there is already sufficient profit accrued, before an earnings report is presented. GREED can be the undoing of a nice profit!