Roku: The Undervalued Streaming Giant Down 87%—Is Now the Time to Buy?

The stock market’s volatility in recent years has left many growth stocks in its wake, but few have faced as sharp a decline as Roku (ROKU). Once a darling of the streaming revolution, Roku’s shares have plummeted 87% from their all-time high in 2021, reaching a multi-year low by April 2025. Yet beneath the noise of short-term losses lies a company with accelerating revenue growth, a dominant position in streaming technology, and a valuation that some argue is artificially depressed. Is this the moment to bet on Roku’s long-term potential? Let’s dive into the data.

The Numbers Tell a Contrarian Story

Roku’s stock may be down, but its revenue growth hasn’t slowed. In 2024, sales rose 27% year-over-year, outpacing the growth of mature giants like Home Depot (HD) and Starbucks (SBUX), which grew by just 6% and 4%, respectively. Yet Roku trades at a price-to-sales (P/S) ratio of 2.2, comparable to these slower-growth peers. By contrast, its streaming peer Netflix (NFLX), which also relies on subscription-driven models, trades at 11x sales—a stark valuation discrepancy.

This mismatch raises a critical question: Why is Roku’s valuation so low relative to its growth trajectory? The answer lies in its short-term sacrifices for long-term dominance.

Growth Over Profits: A Strategic Gamble

Roku has prioritized market expansion over immediate profitability. Aggressive investments in research and development (R&D) and sales/marketing—which surged during post-pandemic inflation—have fueled its global reach. The company now operates in over 100 countries, and its video-based digital advertising business is scaling rapidly. However, these efforts have temporarily compressed gross margins and delayed near-term earnings.

For example, Roku slashed prices on its media players to attract price-sensitive consumers, a move that boosted market share but pinched margins. The strategy paid off: its installed base of streaming devices grew by 18% in 2024, and ad revenue rose 35% year-over-year. Yet investors, fixated on short-term profit warnings, have punished the stock.

Risks on the Horizon

While the valuation case is compelling, risks abound.

1. Profitability Pressures: Roku’s net income remains negative, with losses widening as it invests in growth. Unlike mature firms like Starbucks, which rely on steady cash flows, Roku’s model demands patience.
2. Market Volatility: The stock is a “roller coaster,” dropping 36% from its 2025 peak by April. Investors need a long-term horizon to ride out swings.
3. Geopolitical Headwinds: Its international expansion faces hurdles, including unpredictable government policies and low consumer confidence in emerging markets.

Why Buy Now? The Case for a Turnaround

Despite the risks, three factors make Roku a compelling contrarian play:

1. Dominance in Streaming Tech: Roku’s operating system powers over 50 million active streaming accounts, and its ad platform is becoming a key revenue driver. With Netflix’s global market cap now over $100 billion, Roku’s valuation could catch up as its ad business matures.
2. Valuation at a Bargain: At 2.2x sales, Roku is priced as if it’s a slow-growth firm. If it can replicate Netflix’s early expansion into international markets, its P/S ratio could eventually approach 10x, implying significant upside.
3. Strategic Buying Tactics: To mitigate volatility, investors can dollar-cost average into the stock or purchase shares in thirds. This approach reduces exposure to short-term swings.

Conclusion: A High-Risk, High-Reward Bet on the Future of Streaming

Roku’s 87% decline from its 2021 peak has created a rare opportunity to buy a high-growth company at a value-stock valuation. Its accelerating revenue, global reach, and undervalued metrics position it as a long-term winner in the streaming wars. However, investors must accept the risks: volatile markets, execution challenges in new markets, and the need for patience as margins improve.

For those willing to look past the noise, Roku’s current valuation—2.2x sales versus Netflix’s 11x—suggests a stark disconnect between its growth and its price. This could be a generational buying opportunity, but only for those prepared to hold through the turbulence. As the streaming landscape evolves, Roku’s infrastructure and innovation may yet prove its skeptics wrong.

Data as of April 2025. Past performance does not guarantee future results.