Roku (ROKU): Evaluating Valuation Following New AI Features and Content Expansion

Roku (ROKU) has just made headlines with a fresh wave of updates, unveiling new artificial intelligence-powered features on its platform and expanding its content lineup through creative partnerships. The launch of the Roku Ads Manager, which uses generative AI to streamline commercial production, signals a push to make advertising more dynamic and accessible on Roku’s platform. At the same time, the integration of interactive educational games via Future Today is adding new ways for families and younger viewers to spend time on Roku devices. These features could heighten engagement and open up additional opportunities for growth. For investors, these announcements come after a year of mounting optimism in Roku’s shares. The stock has climbed 37% over the past year, with much of that momentum building in recent months. While some earlier headlines around the streaming industry caused volatility, Roku’s ongoing investments in AI and content appear to be shifting the conversation. The company is positioning itself as a digital platform that is adapting quickly to both advertiser needs and evolving audience habits. With this steady run-up and fresh innovations now available, a key question remains: is Roku trading at a bargain relative to its potential, or are investors already pricing in the next wave of growth?

Most Popular Narrative: 5.5% Undervalued

According to the community narrative, Roku appears to be undervalued by 5.5% based on analyst projections of future earnings and growth.

Ongoing investments in proprietary content (for example, The Roku Channel), self-service ad solutions, and performance marketing are boosting user engagement and attracting new cohorts of advertisers (especially SMBs). These efforts are adding incremental high-margin advertising revenue and broadening usage, which are supporting margin and earnings growth.

Curious about what is fueling Roku’s projected upside? A bold mix of ambitious revenue targets, margin improvement, and a valuation multiple that hints at big expectations for future profitability. The narrative relies on financial leaps that draw comparisons with the hottest names in tech. Ready to discover the numbers behind Roku’s fair value and see what is required to hit those targets?

Result: Fair Value of $101.15 (UNDERVALUED)

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

However, fierce competition from tech giants and Roku's dependence on ad revenue could quickly shift its growth outlook if market dynamics change.

Find out about the key risks to this Roku narrative.

Another View: Discounted Cash Flow Model

Turning to the SWS DCF model, we see a different perspective on Roku’s valuation. This method suggests Roku’s shares are trading well below their estimated fair value. This raises the question: could the market be overlooking its potential?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Roku for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Roku Narrative

If you have a different perspective, or want to dig into the details yourself, it is easy to develop your own narrative and insights in just a few minutes. 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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