Right now, analysts seem to be less enamored with Roku (NASDAQ:ROKU). Instead, they’re favoring the newly public Vizio (NYSE:VZIO). Why? One big reason for this is the fact that ROKU stock is much more expensive. Both are connected-TV companies that sell TVs as well as ads on those TVs. But don’t expect to see ROKU rise much further compared to Vizio — at least until it grows into its sky-high valuation.
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For example, Roku has a $41.6 billion market capitalization, but analysts forecast sales will hit $2.56 billion this year. That means ROKU stock is at 16.25 times sales. That would even be high for a price-to-earnings (P/E) ratio rather than a price-to-sales (P/S) multiple.
Compare that with Vizio, which now has a $4.84 billion market value. Analysts foresee $2.17 billion in sales this year, or just 15% less than Roku. However, its P/S ratio is just 2.23 times that estimated revenue. That means Roku has just 15% more revenue but is 7.29 times more expensive (i.e., 16.25 divided by 2.23). Obviously, something is wrong here.
In other words, ROKU stock is likely to keep falling. So far this year, it’s down just 6% but is also way off its high mid-February close of $469.70. Today, it changes hands at around $312. This is a drop of over 33%.
ROKU Stock: Comparing Margins