Roku's Trade Desk Partnership Creating Robust Ad Revenue Runway

Investment Thesis - Roku's management has effectively built on ad revenue catalysts over the past 15-18 months [1] Ad Monetization Strategy - The company is focused on delivering growing adjusted EBITDA and positive free cash flow through tools and product features aligned with its ad platform [2] - Roku's three-pillar ad monetization strategy includes enhancements to the Roku Home Screen, increasing Roku-billed subscriptions, and scaling ad demand through partnerships with leading DSPs like The Trade Desk [2][6] - Roku's stock has shown signs of recovery, emerging from correction territory, although it remains down significantly [2][3] User Metrics and Engagement - Roku has reached 83.6 million active accounts globally, with a 20% year-over-year increase in streamed hours, totaling over 30 billion hours [4][5] - The company's ARPU is showing sequential improvement, attributed to high user engagement and the success of its FAST channels [5] - Roku Channel's market share has increased to 1.6%, up from 1.5%, aided by expanded programming including live sports [5] Revenue Growth and Partnerships - Platform revenue grew 11% to $824 million, with expectations for sequential growth this year, positioning Roku for mid-teens growth in CY24 and CY25 [5][6] - Roku's partnerships with DSPs, including the adoption of Trade Desk's UID2 for ad targeting, are enhancing ad demand on its platform [6] Valuation and Market Sentiment - Despite improvements, Roku is trading at a lower valuation compared to the S&P 500, indicating skepticism about its growth prospects [7] - The company is expected to achieve a 13-15% CAGR growth through CY25, with potential for significant expansion in sales multiples [7] Device Sales Performance - Roku's device revenue increased approximately 39% in Q2, indicating strong sales momentum ahead of the holiday season [8] - The outlook for device sales is positive, contingent on retail spending trends during the holiday season [8] Overall Sentiment - Improved performance in the platform segment has shifted sentiment positively towards Roku, although valuation levels remain depressed, suggesting strong upside potential [9]