Roku: Well Positioned For H2 2024 After Market Share Gains

Core Viewpoint - The company has made progress in gaining market share and is positioned favorably in terms of risk/reward, leading to a recommendation to buy Roku stock [1][7]. Market Penetration - Roku Channel has achieved a market share of 1.5% in TV usage across all platforms, indicating successful penetration [2]. - Streaming households have increased from 71.6 million in Q1 2023 to 81.6 million in Q1 2024, reflecting a 14% year-over-year growth [3]. - Streaming hours have risen from 25.1 billion in Q1 2023 to 30.8 billion in Q1 2024, marking a 23% increase [3][10]. Advertising Strategy - The company has seen an increase in programmatic ad spending, highlighting the strength of its advertising offerings [4]. - Roku has launched its own ad exchange, enhancing the appeal for advertisers to spend on its platform [11]. - A partnership with Trade Desk opens Roku's ad inventory to a larger network of advertisers, further expanding its advertising reach [22]. Financial Performance - The company anticipates a sales growth of approximately -10% over the next two years, driven by the expansion of its ad platform [5]. - Roku's platform revenue accounts for 86% of total revenue, which has slowed significantly since the pandemic [18][27]. - The company is currently trading at 2.3x forward sales and 1.7x EV/sales, indicating depressed investor sentiment [5][24]. Competitive Landscape - The rise of free ad-supported streaming platforms like Tubi indicates a shift in consumer behavior towards ad-supported content [9][20]. - Competition in both device and advertising spaces will be crucial to monitor as Roku moves into the second half of FY24 [19]. Valuation Insights - The current valuation appears to have priced in the worst-case scenarios, suggesting potential for multiple expansion [13][24]. - Compared to the S&P 500's expected growth rate of ~4.8%, Roku shows significant upside potential as it enters H2 2024 [24].