Roku Shares Rocket Higher on Ad Revenue Strength. Is It Too Late to Buy the Stock?

Core Viewpoint - Roku has faced challenges since its peak in 2021, with a shift in focus from rapid customer acquisition to profitability among streaming platform customers [1] Financial Performance - In Q4, Roku's revenue increased by 22% year-over-year to $1.2 billion, surpassing its guidance of $1.14 billion, driven by political advertising and improved home screen usage [4] - Adjusted EBITDA rose 62% year-over-year to $77.5 million, significantly exceeding the guidance of $30 million [5] - Platform revenue grew by 25% to $1.04 billion, with 4.3 million new user households added, bringing the total to 89.8 million, a 12% increase from the previous year [6] - Average revenue per user (ARPU) increased by 4% to $41.49, but has only grown 1% since the end of 2021 [6] Margins and Profitability - Platform gross profits rose 22% to $559.9 million, but gross margins fell by 120 basis points [7] - Device revenue increased by 7% to $165.7 million, but the company reported a negative gross profit of $47.4 million on equipment sales due to competitive pricing and excess inventory [7] Future Guidance - Roku forecasts 2025 revenue to be approximately $4.61 billion, representing 12% growth, with platform revenue expected to increase by 12% [8] - For Q1, Roku projects revenue of $1 billion, a 13% year-over-year increase, and adjusted EBITDA of $55 million, a 35% increase [9] Strategic Initiatives - The company is focusing on international expansion, particularly in the Americas and the U.K., and is making progress in monetization efforts in Canada [10] - Roku is launching new ad products and enhancing integration with third-party platforms, including innovations like Roku Data Cloud and Roku Ads Manager [11] Valuation Perspective - Roku trades at an enterprise value (EV)-to-EBITDA multiple of about 35 times 2025 analyst estimates, which is considered high given the significant stock-based compensation expenses [14] Overall Outlook - The company is positioned for a potentially strong 2025, with solid full-year guidance and new adtech innovations that could drive future growth [13][15]