Roku: A Growth Stock Down 84% That's Worth Buying Now

Roku (ROKU -2.56%) has been on a rollercoaster ride since its initial public offering in 2017. After soaring by 1,940% in just two years, the stock has since plummeted by 84% from its peak price. Despite the recent struggles, there are several reasons why investors should consider buying this growth stock right now.



First and foremost, the cord-cutting trend is still in full swing. As of 2021, more than 57 million households in the U.S. had canceled their cable TV subscriptions, and this number is expected to continue to decline. Roku's platform provides a convenient and affordable way for consumers to access streaming services, making it an attractive option for cord-cutters. With a user base of 83.6 million active accounts, Roku is well-positioned to capitalize on this trend.



Another reason to be bullish on Roku is its dominant market share in the connected television market. According to Pixalate, Roku accounts for 37% of North America's connected television market, far outpacing its nearest competitor, Amazon's FireTV platform, which has only 15% market share. This strong market position allows Roku to generate substantial revenue growth and attract more advertisers to its platform.



Roku's advertising business has also been a significant driver of growth. The company's ad-supported streaming channel, The Roku Channel, has seen significant growth in viewership, further boosting advertising revenue. In the first quarter of 2024, Roku's advertising revenue grew by 21% year-over-year, demonstrating the positive impact of the streaming trend on the company's business.



Despite the recent struggles, Roku's long-term prospects remain promising. The company's expansion into new markets, such as Latin America, and its strategic acquisition of data analytics firm Alphonso have enhanced its ability to target and engage with advertisers. As user growth and monetization continue to improve, the long-overdue recovery of Roku's stock could finally begin in earnest.

In conclusion, Roku's dominant market share, strong user base, and growing advertising revenue make it an attractive growth stock for investors. Despite the recent decline, the company's long-term prospects remain promising, and now may be the perfect time to buy this discounted growth stock.