Media Streaming Technology Expert roku (NASDAQ:ROKU) He’s not getting any love from Wall Street. The stock is down 28% year to date, continuing a bearish trend that began in the summer of 2021.
Roku’s market movements have been so brutal that one would think it was a company on the verge of bankruptcy. But nothing could be further from the truth.
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Roku is thriving with strong sales growth, improved profit margins, and strong cash flow. Additionally, this incredible growth is on the threshold of an online advertising recovery, and I can’t wait to see how the next few years play out.
The inflation panic of 2022 put a “pause” in Roku’s business growth for a while, but the company is back to full profit. The same crisis also undermined Roku’s profit margins, and that trend line is now pointing sharply upward as well.
Net margins should break even in the next holiday quarter, at least in a single quarter. From there, I expect continued sales growth and sustainable bottom line profits in 2025.
But market makers don’t seem to care about positive trading trends. Roku stock fell from $313 to $66 in the chart above, and has already seen the decline so far this year. Did I mention that the company beat analyst expectations across the board by consistently wide margins throughout the year? I mean, sometimes you wonder what it would take to synchronize Roku’s weak stock chart with its booming business results.
I can’t promise a quick price increase, but I do hope Roku gains some respect in 2025.
The current fourth quarter will benefit from generous political ad spending in early November, plus the evolution of a new ad buying partnership with The commercial table (NASDAQ:TTD) and a strong marketing push for Roku’s own products and services. This activity is taking place in an economy that is stabilizing, as the US Federal Reserve has begun to cut interest rates to combat inflation. As a result, consumers in the United States and around the world should have more room to spend on the holidays.
Those catalyst manufacturing building blocks are obviously good for Roku in a direct sense, as the company would benefit from strong smart TV sales in December.
However, that is not the only positive result, nor even the most important. Advertising buyers have been waiting for a healthier economy so they can get back to promoting their products. Naturally, advertising budgets should be reduced when people are not ready to buy what you sell. Recovering from a two-year crisis, Roku has established itself as an effective marketing platform where those advertising dollars can have a strong impact.