3 Must-Know Facts About Roku Before Buying the Stock

Core Insights - Roku is experiencing significant volatility, trading 84% below its all-time high set in July 2021, which may attract investors to consider buying shares [1] Group 1: Revenue Sources - In Q3 2023, only 14.5% of Roku's revenue came from hardware sales, indicating a strategic shift away from hardware [2] - The majority of Roku's revenue now comes from its platform segment, which includes advertising and streaming services, contrasting with 2017 when over half of sales were from physical devices [3] - The platform segment offers a higher gross margin, allowing Roku to adopt a razor-and-blades model where hardware is sold at low margins to increase household penetration [4] Group 2: Market Trends - The rise of streaming and the decline of traditional cable subscriptions have significantly benefited Roku, as less than 50% of U.S. households now subscribe to cable TV [5][6] - Roku's platform aggregates various streaming services, enhancing user experience and solidifying its position as the leading smart-TV operating system in the U.S. [7] Group 3: Financial Performance - Roku reported a net income of $242.4 million in 2021, but this was an anomaly due to pandemic-related revenue surges [8] - From early 2022 to 2023, Roku incurred a cumulative net loss of over $1.2 billion, primarily due to investments in customer acquisition and product development [9] - In the first nine months of 2024, Roku's net loss improved to $93.8 million from $631.3 million in the same period of 2023, indicating potential positive changes in financial performance [9]