Is It Time to Give Up on Roku Stock?

Core Viewpoint - Roku's stock has significantly declined, down nearly 90% from its peak of $490.76 in mid-2021, despite a growing user base and leadership in the streaming TV market [1][2] Group 1: Business Model and Market Position - Roku's business model involves selling devices at low margins to attract viewers, which then leads to revenue from content partnerships and advertising [4] - Roku maintains a leadership position in North America, with nearly 40% of streaming households using its devices, and claims to be the top streaming platform in the U.S., Canada, and Mexico [5] - The shift from traditional TV to streaming benefits Roku, as device sales contribute to platform revenue, resulting in a 16% year-over-year increase in Q1 revenue to $1.02 billion [6] Group 2: Financial Performance and Challenges - Despite revenue growth, Roku has not returned to profitability, reporting a Q1 net loss of $27 million, although this is an improvement from a $51 million loss in the previous year [8] - Roku ceased publishing average revenue per user (ARPU) data starting in 2025, which may concern investors, while Q1 free cash flow was $298 million, down 30% year-over-year [9] - The stock's price-to-sales (P/S) ratio is currently 2.1, a significant drop from over 30 in 2021, indicating a shift to a value stock perception [10] Group 3: Investment Considerations - Investors may consider holding or adding shares, as the company could potentially return to profitability next year, addressing long-standing concerns [11] - Roku's current valuation may be perceived as a low point, and if it can reclaim a growth stock valuation, it could offer substantial long-term returns [12]