Roku Stock: Well Positioned For H2 2024 After Market Share Gains (NASDAQ:ROKU)

Marvin Samuel Tolentino Pineda has presented an investment thesis focusing on Roku, a streaming platform that has seen significant shifts in media consumption behavior due to inflation and price hikes by other streaming platforms. Roku’s stock has had a challenging start to the year, losing 35% of its value. However, Pineda believes most of the fears have been priced in, and the company appears to be making headway in gaining market share, as indicated by NielsenIQ data.

One positive sign is the growth of Roku’s namesake channel, the Roku Channel, which has gained 1.5% of TV usage in terms of minutes across all TV platforms, according to Nielsen’s audience viewing behavior data. The increase in streaming households on Roku’s TV platforms, as well as the rise in Streaming Hours, supports this trend.

Roku is also expanding its ad business, with the launch of its own ad exchange and partnership with a leading DSP, Trade Desk. These moves should make Roku’s platform more appealing to advertisers, potentially increasing ad spend. Management has expressed a focus on expanding ad demand as a strategy to drive platform growth.

Valuation-wise, Roku is trading at relatively low multiples compared to the S&P 500, despite a forecasted sales growth of around 10% over the next two years. This suggests significant upside for Roku as it enters H2 of 2024.

However, competition is a key risk, especially in the ad space. The success of Roku’s ad products and its ability to maintain or increase ARPU will be crucial. International user growth, particularly in regions like Mexico and Brazil, has impacted ARPU in the past, and Roku will need to address this issue moving forward. Despite these risks, Pineda is optimistic about Roku’s potential and recommends buying the stock.

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