ROKU vs. WBD: Which Ad-Supported Streaming Stock is the Better Buy?

Core Viewpoint - Roku and Warner Bros. Discovery are competing in the ad-supported streaming market, with Roku adopting a platform-first approach focused on CTV advertising, while WBD leverages its content library to enhance its ad-lite streaming tier through Max [1][2]. Roku's Strategy and Performance - Roku's advertising business showed strong growth in Q4 2024, with advertising revenues increasing faster than subscription revenues, excluding political ads which made up 6% of platform revenues. Overall platform revenues rose by 25% year over year [3]. - Viewership on The Roku Channel increased by 82% year over year, significantly expanding its ad-supported reach [3]. - Roku has enhanced its advertising ecosystem through a partnership with Yahoo DSP, improving audience targeting via Roku Data Cloud and Roku Exchange. Innovative ad formats have increased engagement, with Neutrogena's campaign achieving one-third of its reach through home screen promotion [4]. - The launch of Roku Ads Manager in 2024 aims to expand access to CTV advertising for small and medium-sized businesses, positioning Roku to outperform the digital ad market in 2025 [5]. - The Zacks Consensus Estimate for Roku indicates a projected loss of 26 cents per share for 2025, with revenues expected to reach $4.59 billion, reflecting an 11.52$39.03 billion, indicating a 0.74% year-over-year decline [11]. Stock Performance and Valuation - Year-to-date, Roku shares have decreased by 19.9%, outperforming WBD's 24.1% decline, while both have underperformed the Zacks Broadcast Radio and Television industry's decline of 2.1% [12][14]. - Roku's price-to-cash flow ratio stands at 39.72X, reflecting investor confidence in its growth potential, compared to WBD's 3.66X, indicating more cautious market sentiment [15]. Investment Opportunity - Roku presents a more attractive investment opportunity due to its strong execution in the CTV advertising market, with rising platform revenues and innovative ad products enhancing engagement. Its SMB-focused ad platform and strategic partnerships further bolster monetization potential [18]. - Despite recent share price challenges, Roku's premium valuation suggests confidence in its scalable, ad-driven business model, while WBD faces ARPU pressures and a less established streaming ad strategy [19].