Once a darling tech pick on Wall Street and described as a growth stock that savvy investors should own, Roku (NASDAQ: ROKU) has fallen from grace. Roku lost 19.22% of its stock price on Friday alone and 26.77% over the week, plunging from $147.55 to $108.05. Big moves by established titans Comcast (NASDAQ: CMCSA) and Facebook (NASDAQ: FB), as well as severe analyst downgrades, spurred Roku investors to massively dump their holdings due to a change in sentiment on Wall Street and long-term growth fears.
On Wednesday, Comcast announced its Xfinity Flex streaming box will become free for its Internet-only subscribers, slashing the price from $5 per month to zero. The Xfinity Flex connected box aggregates content from popular streaming platforms including Netflix (NASDAQ: NFLX), Google's (NASDAQ: GOOGL) YouTube, Amazon (NASDAQ: AMZN) Prime, and more, meaning it directly competes with Roku's streaming boxes. Comcast said millions of existing and new customers will be able to enjoy access to their favorite streaming services directly from their televisions thanks to the Internet-connected 4K UHD streaming TV device, the Xfinity Voice Remote, and a redesigned guide, as well as watch more than 10,000 free movies and TV shows.
Also on Wednesday, Facebook unveiled its new Portal TV product, a device that turns most TVs into a WhatsApp or Facebook Messenger video chat channel through an HDMI connection. It also allows video streaming from Amazon Video, Facebook Watch, Showtime, and Starz. The Portal TV aims to make Facebook's hardware cheaper and more immersive by taking over screens that users already own. The Portal system lacks streaming apps like Netflix and Hulu, so it does not directly compete with Roku. But Portal TV adds a social aspect to the TV experience by allowing connected users to play games or watch shows on Facebook Watch together. For privacy, the Portal TV lets users cover the camera and switch off the microphone. The flagship Portal TV device costs $149, while the 8-inch Portal Mini costs $129 for a sleek, minimalist size.
The moves by Comcast and Facebook, though worrying, might ultimately matter little to Roku. Their success depends on how many consumers are willing to switch to Comcast broadband service or buy a new Facebook TV device. In response, Roku unveiled a new device lineup on Thursday, updating its Roku Express and Ultra players and introducing a Roku Express exclusively for Walmart (NYSE: WMT) and a Streaming Stick exclusively for Best Buy (NYSE: BBY). Roku also updated its operating system to OS 9.2. Still, Roku's biggest looming challenge could be direct-to-consumer streaming competition from Apple (NASDAQ: AAPL) and Disney (NYSE: DIS). Ultimately, even if the new lineup boosts revenue, it might not save Roku stock, which already posted a massive run-up from $32 in January that prompts overvaluation concerns.
The author owns a small long position in AAPL and WMT.