The investment landscape has been nothing short of a wild ride recently. Following a significant downturn, we witnessed an impressive recovery, with the Nasdaq Composite bouncing back from a 35% dip in 2022 to a robust 43% rise in 2023. Notably, technology stocks initially took a hard hit and emerged as some of the biggest gainers last year.

Despite this market upswing, many stocks haven’t recovered to their pre-bear market peaks. A perfect example is Roku (ROKU 3.58%). Even after an impressive 125% surge in the previous year, its stock price remains 83% below its mid-2021 zenith.

Roku’s Bright Future: More Than Just a Streaming Service

Roku, the leading streaming platform, holds an impressive 51% market share globally, per Pixalate data. This dominance represents the company’s best performance since Q1 2020.

Roku’s expansion isn’t limited to streaming alone. Its rapid growth in the connected TV sector has positioned it as the top smart TV operating system in the U.S., Canada, and Mexico, further solidifying its market presence.

A significant portion of Roku’s revenue comes from advertising, with about 10,000 channels on its platform, most of which are ad-supported. The company earns 30% from the advertising on these channels. Additionally, The Roku Channel, Roku’s in-house streaming service, has seen substantial growth, rivalling the likes of Peacock and HBO Max in terms of viewership.

This wide and growing reach increasingly attracts advertisers, highlighting Roku’s robust platform.

Resilience and Growth Opportunities

Despite facing challenges, Roku has shown remarkable resilience. It has consistently increased its audience each quarter. For instance, active accounts grew by 16% to 75.8 million in the third quarter, and streaming hours surged by 22% to 26.7 billion. This translates to an average of nearly four hours of daily viewing per Roku user, up from the previous year.

The declining trend in cable TV subscriptions partly drives this growth. According to Leichtman Research Group, the pay-TV industry lost 5.9 million subscribers in 2022, with many turning to streaming services like Roku.

Moreover, as ad spending shifts from traditional broadcast TV to streaming services, Roku stands to benefit significantly. According to the Standard Media Index, ad spending on connected TVs and streaming services jumped by 39% year over year in the third quarter.

Roku’s recent financials further indicate a recovery from the downturn. Its total net revenue grew by 20% year over year in the third quarter, and it achieved positive adjusted EBITDA for the first time since early 2022.

Roku: An Undervalued Gem

Considering Roku’s journey and potential, its stock appears to be undervalued, trading at less than 3 times next year’s sales, near its historically low valuation.

As the shift from cable to streaming accelerates, Roku’s audience and value will likely grow. This, coupled with its current discounted price, makes it an opportune time to consider investing in Roku.

A Thoughtful Investment Consideration

Before investing in Roku, it’s worth noting that it wasn’t included in The Motley Fool Stock Advisor’s list of top 10 stocks. However, considering the potential growth and current valuation, Roku remains an attractive option for forward-looking investors.

Overall, Roku’s resilience, growing market share, and strong financials, combined with the ongoing shift in viewing habits, present a compelling case for its inclusion in a savvy investor’s portfolio.

Source: https://www.fool.com/investing/2024/01/21/1-super-growth-stock-down-83-to-buy-hand-over-fist/