Once a pandemic darling that was making its investors rich, 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.
Here are three reasons to buy Roku like there's no tomorrow -- and that's on top of the fact that the stock trades at a cheap price-to-sales multiple .
Key metrics
The first reason to scoop up shares stems from its strong performance metrics. In the first 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 active accounts. That figure was up from 80 million at the end of last year. And it represented an impressive 14% increase compared to the first quarter of 2023. This wide reach gives Roku top market share in 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 that might worry investors is Roku's monetization trends. Average revenue per user totaled $40.65 in the first quarter. While this was down from six months ago, it does appear to be stabilizing.
Industry position
It's been interesting to watch the changing media landscape over the past several years. From an investor's perspective, it can be confusing trying to understand what's happening. The good news, though, is that Roku looks to be well positioned in the industry.
It benefits from the cord-cutting trend, as consumers cancel their traditional cable-TV packages and move fully to streaming. In the U.S., less than half of all households still have their cable subscriptions. And the percentage is expected to keep declining going forward.
Given the multitude of streaming services available, having a single user interface that combines these content offerings drastically improves the viewing experience. This is where Roku's value proposition speaks for itself.
Roku is able to grow its business because of the billions of dollars that are spent by content companies like Netflix and Walt Disney . By aiming to be an agnostic platform that provides broad distribution capabilities to content providers, Roku stands to gain from the rise of streaming with more accounts signing up over time.
Ad market
Rapidly rising interest rates in 2022 dampened the perspective on the economy. This resulted in marketing executives paring back their ad budgets in the anticipation that a recession would happen and that consumer spending would be under pressure. But this didn't become a reality.
Roku's platform segment, which enters into advertising revenue deals with its content partners, grew sales by 19% in Q1 to $755 million, representing 86% of the company total. This double-digit growth is very encouraging to see.
"The year-over-year growth of video advertising across the Roku platform outperformed both the overall ad market and the traditional linear TV ad market in the U.S.," Roku's CEO and CFO wrote in the Q1 2024 shareholder letter.
Over time, there's a huge opportunity for Roku to become an even bigger force. Consumers are spending more and more time watching streaming services. As ad dollars catch up, flowing from traditional cable TV, Roku looks like it is going to continue being a big beneficiary. And this supports the prospects of solid top-line growth.
Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Netflix, Roku, and Walt Disney. The Motley Fool has a disclosure policy .
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