year (NASDAQ:ROKU) Stock is down 18% in 2024 according to data provided by Standard & Poor’s Global Market Intelligence. The market was wary of the competition and began to lose patience with its losses.
Roku is the best streaming platform in the US. More people buy and use streaming devices than any other competitor, including… Amazon. It is also the number one platform in Canada and Mexico, and is starting to make a bigger play for international businesses.
The hardware business comes with low profit margins. Although this is what Roku is known for commercially, Roku makes a lot more money from its advertising business. The two work together on an important dance. When users purchase a Roku device, they get a Roku account to access all the streaming networks available on the platform, including free Roku channels. More users means more viewers and more room for Roku to place ads and generate more, higher-profit sales. The advertising business accounted for 85% of the total in Q3 2024 and generated a gross margin of 54.2%.
However, Roku is still not profitable. It reported a net loss of $94 million for the first nine months of 2024, although that was better than last year’s $631 million. Management expects a loss of $65 million in the fourth quarter. Wall Street It expects a loss of $0.85 per share in 2025.
Part of the market’s concerns is also that it has not been able to increase its average revenue per user. Management claims this is due to its international expansion, which is crucial to sustaining its growth, but the advertising business has yet to follow through.
Finally, the market took it hard when… Walmart It announced it would acquire Roku competitor Vizio in February. This was completed in December.
The market wasn’t very forgiving of Roku’s deficit last year, but there were many positives throughout the year. The third quarter was the fifth consecutive quarter of positivity rate Earnings before interest, taxes, depreciation and amortisation EBITDA, free cash flow, and net loss are improving as sales continue to increase. It’s finding new ways to grow, from international expansion to innovative advertising launches and partnerships. It recently started running ads on its homepage, so even viewers who would go to a premium streaming channel are seeing the ads.
The market is starting to sense the opportunity here, and Roku stock is up 32% over the past six months.
Before you buy shares in Roku, consider the following:
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