Late in a bull market, the quality of companies launching IPOs often declines. Roku is another money-losing tech IPO that has the feel of insiders cashing out on the public.
Roku has never been profitable in 15 years. The $14 IPO price appears to have been arbitrary without a supporting thesis for this apparent overvaluation.
Roku has followed the pattern of other hot IPOs whose prices have spiked initially but then sold off sharply to give back much of the initial gains.
The market may continue to sell this much-hyped IPO lower to a more reasonable valuation as questionable fundamentals and rising competition from superior companies are factored into the price of this stock.
Some IPOs are to fund future growth. Other IPOs are for management to begin cashing out. It is important to differentiate. Trader’s Idea Flow believes that Roku will become the next broken tech IPO to trade below its IPO price of $14.
This idea was discussed in more depth with members of my private investing community, Trader’s Idea Flow.
Full disclosure: Trader’s Idea Flow is a long/short trading service with some trades being only a day or two in duration. We are often a momentum trader both long and short. For example: Our Roku (NASDAQ:ROKU) long position was established on IPO day right out of the gate as the stock began trading. We then took profits the next day for a very significant short-term gain. We then established a short position. We are short Roku shares now. This post to our Marketplace service, Trader’s Idea Flow, was later copied to Instablog.
source : https://seekingalpha.com/article/4111259-overbought-roku-may-become-next-broken-tech-ipo
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