Once a pandemic darling that was making its investors wealthy, Roku (NASDAQ: ROKU) has come crashing back toward Earth. The shares trade 88% below their all-time high, which was established in July 2021.
But don’t let that distract you from the actual business. This leading streaming platform has some positive attributes that investors should know and appreciate.
Listed here are three reasons to purchase Roku like there is not any tomorrow — and that is on top of the proven fact that the stock trades at an inexpensive price-to-sales multiple.
Key metrics
The primary reason to scoop up shares stems from its strong performance metrics. In the primary three months of 2024, the business reported a 19% year-over-year revenue jump. And this was after revenue rose 11% in 2023.
What’s more, the user base continues to expand. As of March 31, Roku had 81.6 million lively accounts. That figure was up from 80 million at the tip of last yr. And it represented a formidable 14% increase in comparison with the primary quarter of 2023. This wide reach gives Roku top market share within the smart-TV market in North America.
Engagement shows no signs of weakness. In Q1, a whopping 30.8 billion hours of content was watched on the Roku platform. That number has continued to go up steadily with each passing quarter.
One area which may worry investors is Roku’s monetization trends. Average revenue per user totaled $40.65 in the primary quarter. While this was down from six months ago, it does seem like stabilizing.
Industry position
It has been interesting to observe the changing media landscape over the past several years. From an investor’s perspective, it could actually be confusing trying to know what’s happening. The excellent news, though, is that Roku looks to be well positioned within the industry.
It advantages from the cord-cutting trend, as consumers cancel their traditional cable-TV packages and move fully to streaming. Within the U.S., lower than half of all households still have their cable subscriptions. And the proportion is anticipated to maintain declining going forward.
Given the multitude of streaming services available, having a single user interface that mixes these content offerings drastically improves the viewing experience. That is where Roku’s value proposition speaks for itself.
Roku is capable of grow its business due to the billions of dollars which are spent by content corporations like Netflix and Walt Disney. By aiming to be an agnostic platform that gives broad distribution capabilities to content providers, Roku stands to achieve from the rise of streaming with more accounts signing up over time.
Ad market
Rapidly rising rates of interest in 2022 dampened the angle on the economy. This resulted in marketing executives paring back their ad budgets within the anticipation that a recession would occur and that consumer spending could be under pressure. But this didn’t grow to be a reality.
Roku’s platform segment, which enters into promoting revenue deals with its content partners, grew sales by 19% in Q1 to $755 million, representing 86% of the corporate total. This double-digit growth may be very encouraging to see.
“The year-over-year growth of video promoting across the Roku platform outperformed each the general ad market and the normal linear TV ad market within the U.S.,” Roku’s CEO and CFO wrote within the Q1 2024 shareholder letter.
Over time, there is a huge opportunity for Roku to grow to be an excellent greater force. Consumers are spending increasingly more time watching streaming services. As ad dollars catch up, flowing from traditional cable TV, Roku looks like it will proceed being a giant beneficiary. And this supports the prospects of solid top-line growth.
Must you invest $1,000 in Roku at once?
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Neil Patel and his clients haven’t any position in any of the stocks mentioned. The Motley Idiot has positions in and recommends Netflix, Roku, and Walt Disney. The Motley Idiot has a disclosure policy.
3 Reasons to Buy Roku Stock Like There’s No Tomorrow was originally published by The Motley Idiot