The 3 Best Reasons to Buy Roku Stock, and the 1 Worst Reason to Sell

July 30, 2023

minute read

Roku's latest earnings report demonstrated several positive aspects, leading to a significant 30% surge in its stock price. The company surpassed management's guidance targets and exceeded Wall Street's estimates, prompting investor enthusiasm. While there are compelling reasons to consider investing more in Roku, one notable concern stands out amidst the positive results.

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Roku's success in ad sales is particularly noteworthy, with strong rebound performances observed in two key sectors: consumer packaged goods (CPG) and health and wellness products. The partnership with Shopify for ad-based shopping services further enhances Roku's potential. The Roku City platform and the line of Roku-branded smart TV sets also contribute to the company's diversification efforts, fostering user engagement and expanding market reach.

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Additionally, Roku's growth in active accounts and streaming hours indicates a robust user base, positioning the company for long-term loyalty. This user-focused strategy aligns with the approach taken by Netflix, Roku's former streaming hardware division, which ultimately led to its profitability.

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However, one area of concern lies within the media and entertainment (M&E) sector, which is traditionally Roku's largest and most significant ad-buying sector. Unfortunately, the M&E sector is currently lagging due to ongoing strikes among Hollywood's unions, impacting the industry's near-term prospects. This slowdown raises potential challenges for Roku's ad orders and could be a significant point of concern for investors.

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Despite the recent stock price surge, Roku's shares have only seen a modest increase of 2% over the past year. As an investment opportunity, Roku's performance and potential for future growth continue to be appealing, especially considering its diversification and user-oriented approach. However, it's essential to acknowledge the potential risks and the M&E sector's current challenges when making investment decisions.

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