May was a tough month for crypto investors. A whirlwind of news involving Elon Musk and China sparked a crash that erased nearly $1 trillion in market value. And Dogecoin (CRYPTO:DOGE) was no exception. The meme-inspired cryptocurrency is down over 50% from its high as of this writing.
Often, dips in the market are a good buying opportunity — that’s not the case with Dogecoin. Instead, investors should consider buying Roku (NASDAQ:ROKU). The company recently delivered strong first-quarter results, and its future prospects look promising. Here’s what investors should know.
By now, you’ve probably heard stories about Dogecoin millionaires, the lucky few who rode the meme-currency to riches. Here’s my advice: Stop reading those stories. They make Dogecoin seem alluring — if other people got lucky, you could too, right?
Unfortunately, the truth is much less inspiring: Dogecoin was a joke, and there’s nothing special about it.
Dogecoin isn’t the most valuable cryptocurrency like Bitcoin, it doesn’t support smart contracts like Ethereum, it wasn’t designed for anonymity like Oxen, it doesn’t have the transaction capacity of Polkadot — and the list goes on. In fact, virtually all of Dogecoin’s success can be attributed to social media, not some underlying technical genius.
Dogecoin’s very inception came courtesy of Twitter. In 2013, Jackson Palmer was flipping between two tabs on his browser: one was the popular crypto site CoinMarketCap, and the other was a news article featuring the doge meme. As a joke, he combined the two in a now famous tweet: “Investing in Dogecoin, pretty sure it’s the next big thing.”
From there, the Reddit community joined the cause, and the meme currency become a popular way to tip users. Then, in April 2019, Elon Musk hopped aboard, tweeting that Dogecoin might be his favorite cryptocurrency. From there, the hype snowballed and voila! Dogecoin became a sensation. Over the next two years, its price skyrocketed over 24,000%.
But none of that changes the facts: There’s still nothing special about this cryptocurrency.
Does that mean its price will keep falling? I have no way of knowing that — no one knows the future. But I do think there are better places to put your money.
Roku is the leading streaming platform in the U.S., both in terms of total viewers and streaming hours. Its ecosystem of devices, connected TVs (CTVs), and content have helped the company build a massive, highly-engaged user base.
As a result, Roku dominates the CTV ad market. In the fourth quarter of 2020, Roku devices captured 46% of all programmatic CTV ad spend, while Samsung took second place with 11% and Apple ranked third with 9%. In fact, Roku had more market share than the next nine companies combined.
So, what’s driving this success? One of Roku’s key advantages is The Roku Channel, its ad-supported streaming service featuring over 50,000 free titles. The company has made significant efforts to add more content to The Roku Channel to improve its quality and expand it in recent years.
To that end, it added more than 100 live TV channels and a Live TV Channel Guide in 2020, and the company even launched The Roku Channel on Amazon‘s Fire TV platform. It also debuted 30 “Roku Originals” in May 2021, featuring content acquired from Quibi.
Put simply, this is driving engagement. In the first quarter, streaming hours on The Roku Channel grew twice as fast as the overall Roku platform. More importantly, 85% of adults (ages 18 to 49) that tuned in to The Roku Channel are no longer reachable through traditional TV.
As a result, marketers are throwing money at Roku to reach this important demographic. Ad impressions on Roku’s platform more than tripled during the quarter, and gross profit surged 132%, a significant acceleration over the 63% growth in 2020.
But strong financial results are nothing new for Roku. The company has consistently delivered impressive growth over the long term.
Q1 2021 (TTM)
Free Cash Flow
Looking ahead, Roku has barely scratched the surface of its market opportunity. In 2020, over the top (OTT) ad sales hit $3.8 billion in the U.S., according to Magna, representing just 7% of total TV ad spend. But in the coming years, more viewers should cut the cord, meaning more marketing dollars will shift to CTV platforms. As the market leader, Roku is well positioned to take the lion’s share.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.