Roku, a company that has capitalized on the streaming entertainment and digital advertising trends, presents an intriguing investment opportunity despite its recent stock price decline. The company’s platform, which aggregates various streaming services, holds the top market share among smart TV operating systems in the U.S., Mexico, and Canada. In fact, 40% of new TVs sold in the U.S. during the first quarter of 2025 came with Roku software.
Roku has posted robust double-digit growth, with revenue increasing by 16% in Q1 2025 and 18% in 2024. By the end of last year, the company had approximately 89.8 million memberships. However, Roku has consistently reported net losses since 2021, tallying a cumulative $866 million in the past nine quarters.
Expense controls could lead to positive operating income by 2026. The company’s financial situation appears stable, with $2.3 billion in cash and equivalents and no debt as of March 31, 2025. This reduces its financial risk.
With shares trading at a price-to-sales ratio of 2.7—69% below the stock’s historical average—the stock’s valuation appears attractive. Investors must consider the competitive landscape, as Roku faces significant competition from big tech companies offering their own streaming apps and devices.
Roku maintains strong market presence
However, Roku has shown resilience and strategic value in a competitive market. JPMorgan has increased its price target for Roku from $75 to $85, maintaining an Overweight rating on the company’s shares. This adjustment reflects continued confidence in Roku’s market position and potential for growth.
The average target price for Roku is $86.12, with a high estimate of $130.00 and a low estimate of $60.00, suggesting an upside of approximately 17.95% from the current price of $73.01. Roku reaffirmed its platform revenue and adjusted EBITDA outlook for the full year 2025, demonstrating confidence in its strategy despite macroeconomic uncertainties. The ongoing shift to streaming services positions Roku at the forefront of this transition, beneficial for its business growth.
The company has diversified its revenue streams, lessening its reliance on media and entertainment and expanding its advertising products and demand sources. The Roku Channel has become the second most popular app on its platform in the U.S., with global engagement growing 84% year-over-year. Challenges remain, including macroeconomic uncertainties, the shift from guaranteed to non-guaranteed advertising, and maintaining high growth rates against tough comparisons from previous years.
Despite these headwinds, Roku continues to solidify its position in the streaming market, supported by strategic business decisions and market trends favoring the shift to digital media. While a 20-year investment horizon is speculative, Roku’s cheap valuation, leading industry position, and substantial growth potential make it a compelling opportunity for long-term investors. Those with a long time horizon should diligently consider the risks and rewards before making a decision.