6. Roku, Inc. (NASDAQ:ROKU)
Number of Hedge Fund Holders: 40
Roku, Inc. (NASDAQ:ROKU) manages a television streaming platform and operates through Platform and Devices segments. It is also involved in streaming service distribution and digital advertising.
The company is rising in popularity. It delivered strong fiscal Q3 2024 results, which marked its first quarter of total net revenue exceeding $1 billion. Its total net revenue underwent a 16% year-over-year increase in fiscal Q3 2024, reaching $1.06 billion. This growth was attributed to streaming service distribution and advertising activities. The simplicity and value of the company’s platform are the primary reasons for its increasing popularity. Roku OS has taken the top spot as the best-selling TV OS in the US for more than five years.
The company’s Roku Channel app took third place on its platform in terms of both reach and engagement for the third consecutive quarter in fiscal Q3 2024. Its streaming hours increased by 80% year-over-year, attributed to the company’s position as the lead-in to television.
Roku, Inc. (NASDAQ:ROKU) is focused on strategic initiatives to grow its Platform revenue. These include Home Screen innovation, increasing Roku-billed subscriptions, and higher ad demand via deeper third-party platform integrations. The company continued to execute these initiatives in fiscal Q3 2024 and attained a 15% year-over-year Platform revenue growth.
The company is also driving growth in engagement, with its streaming hours growing by 20% year over year. Its streaming hours per streaming household grew as well, reaching 4.1 hours per streaming household per day in fiscal Q3 2024, up from 3.9 hours in the year-ago period.
O’keefe Stevens Advisory stated the following regarding Roku, Inc. (NASDAQ:ROKU) in its first quarter 2024 investor letter:
“Roku, Inc. (NASDAQ:ROKU) – An idea that would have seemed unthinkable just a few years back when low P/E or low multiple meant the stock was cheap. Roku is free-cash-flow positive, EBITDA breakeven, and GAAP Net Income unprofitable. Historically, investors tend to shy away from unprofitable businesses. Deeming them too risky. Roku has a $2B net cash position and is reinvesting in the business, grabbing Connected TV market share. Geographic expansion takes time and capital. They have a dominant share and have many tailwinds. Walmart’s acquisition of Vizio adds to the already heightened uncertainty. We can’t remember seeing a company with such “negative” sell-side coverage. 9 buys, 10 holds, and 4 sells. Nearly all reports discuss weighting for clarity, which is why the opportunity exists. Wells Fargo has the lowest price target at $45, or 26% downside. We see a reasonable case for a $100 stock in the near term and long term, owning a compounder with an attractive business model, secular tailwinds, and dominant market share that can translate into a desirable return over the next several years.”
