A Look at Roku’s (ROKU) Valuation After Holiday Device Discounts and Expanded Content Lineup

Roku (ROKU) kicked off its Black Friday sales with a significant 50% discount on the Streaming Stick 4K, increasing pressure on streaming device competitors. The company is also expanding its premium channel lineup.

See our latest analysis for Roku.

While Roku’s holiday promotions and expanded content lineup have fueled a sense of momentum, the 2024 share price return tells a nuanced story. The stock is up 28.4% year to date, while the one-year total shareholder return stands out at a strong 38.5%. Short-term moves have been mixed, yet investor sentiment signals that growth potential is still on the table following these competitive pushes and platform enhancements.

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With these factors in play, the real debate for investors is whether Roku remains undervalued based on its fundamentals and growth prospects, or if the recent rally has already priced in all the upside. Investors may consider whether there is still a window for buyers or if the market has caught up.

Most Popular Narrative: 13.6% Undervalued

Roku’s narrative fair value is set at $110.67, which is notably higher than its latest closing price of $95.63. This gap suggests that the prevalent valuation story is still pointing to meaningful upside, as analysts see ongoing growth levers influencing Roku's price trajectory.

The accelerating shift away from traditional linear TV toward streaming continues to expand Roku's total addressable market and supports long-term growth in active users. This is increasing demand for its connected TV platform, which is expected to drive sustained double-digit platform revenue growth. The global migration of advertising budgets from linear TV to digital and connected TV, together with Roku's rollout of new ad products (such as Roku Ads Manager) and deeper third-party DSP integrations, increases its share of high-margin digital advertising. This is reflected in both revenue growth and higher platform margins.

Read the complete narrative.

Want to know what’s fueling this bold price target? The answer lies in projections for strong revenue and margin growth. Find out what assumptions could make Roku’s future numbers stand out from the crowd.

Result: Fair Value of $110.67 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, intensified streaming competition or shifts in digital ad budgets could quickly challenge Roku’s growth narrative and put pressure on future profitability.

Find out about the key risks to this Roku narrative.

Another View: Multiples Paint a Cautious Picture

While fair value calculations suggest meaningful upside, Roku’s valuation based on its price-to-sales ratio tells a less enthusiastic story. The stock trades at 3.1 times sales, which is higher than both the US Entertainment industry average of 1.3 and the fair ratio of 2.6. This means that, compared to its industry and what the market could move towards, Roku is priced at a premium, raising caution about its upside potential if growth expectations are not fully met. Is this premium justified, or is there more risk than reward at current levels?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Roku Narrative

If you see the numbers differently or want to dig deeper into the data, crafting your own perspective is quick and straightforward. Why not take a few minutes to piece together your view? Do it your way

A good starting point is our analysis highlighting 2 key rewards investors are optimistic about regarding Roku.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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