Unbeatable Bargain: A Streaming Giant at an 84% Discount
Investors, are you ready to pounce on a rare opportunity? Shares of Roku, a leading streaming-television technology company, have plummeted 84% from their pandemic-fueled peak in 2021. Despite the company’s steady progress, the stock has been stagnant since the latter half of 2022, with many investors hesitant to take the plunge. But, as the old adage goes, “the time to be fearful is when others are greedy, and the time to be greedy is when others are fearful.”
A Compelling Prospect at a Discounted Price
Roku’s struggles to achieve profitability and the increasingly crowded streaming market have understandably spooked investors. However, for those willing to take on the risk, Roku remains an attractive prospect at its current price. The company’s core business lies in advertising and serving as a middleman for streaming services, generating over 85% of its revenue and all of its gross profits.
Industry-Leading Market Share
Data from ComScore reveals that Roku controls a staggering 37% of the US over-the-top connected-television advertising market. Additionally, Parks Associates reports that Roku accounts for 43% of the country’s actively used media-playing devices, surpassing its competitors. Although Roku has yet to focus on foreign markets, it has made significant strides where it has ventured.
Progress Amidst Adversity
Despite the stock’s lackluster performance, Roku’s revenue continues to grow, and its losses are shrinking. The company is making forward progress, but the market has yet to reflect this.
A Pandemic-Fueled Surge and Subsequent Correction
Roku’s stock soared 540% during the pandemic, driven by the surge in TV viewing and device sales. However, this rapid growth was unsustainable, and the bear market of 2022 brought the stock back down to earth. While the correction was necessary, the disconnect between the company’s progress and the stock’s performance has lingered too long.
A Promising Future Ahead
Analysts predict Roku will swing to positive full-year profits in 2026, with revenue projected to reach $5.3 billion. The majority of this business will still come from advertising revenue, which is expected to grow at an average annualized pace of 10% through 2027. Roku is well-positioned to capitalize on this growth, leading the company out of the red and into the black.
A Contrarian Opportunity
While analysts and investors remain cautious, this could be an opportunity to go against the crowd. With above-average risk comes above-average upside potential. It’s not a guaranteed winner, but the reward may be greater than most perceive. Sooner or later, the market will reconnect this stock with its underlying company’s growth. It’s better to get in now than to chase it higher once the big move begins.
Leave a Reply