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ROKU Exceeds $1B Mark in Q4 Platform Revenues: Time to Buy the Stock?
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Roku, Inc. (ROKU - Free Report) delivered a stellar fourth-quarter 2024 results, marking a significant milestone as Platform revenues grew 25% year over year to $1.035 billion. This marks Roku's first-ever quarter exceeding the billion-dollar threshold for its high-margin Platform segment, demonstrating the company's successful strategy of monetizing its growing user base through advertising and content distribution.
The company reported narrower-than-expected losses and impressive revenue growth, prompting investors to send shares soaring 13% in after-hours trading following the announcement.
Roku reported a loss of 24 cents per share in the fourth quarter, narrower than the Zacks Consensus Estimate of a loss of 44 cents. The company had incurred a loss of 55 cents loss in the same quarter last year. Total revenues climbed 22% year over year to $1.2 billion, beating the consensus mark by 4.48%.
With the stock already up 42.5% in the past year, many analysts are asking: is it the right time to buy Roku shares?
1-Year Performance
Image Source: Zacks Investment Research
Growing User Base and Engagement Metrics of ROKU
Roku ended 2024 with 89.8 million streaming households globally, adding 4.3 million in the fourth quarter alone and 9.8 million for the full year. The company passed the 90 million milestone in early January 2025, and management anticipates continued strong growth both domestically and internationally.
Streaming hours, a key performance indicator of user engagement, increased 18% year over year to 34.1 billion hours in the fourth quarter. For full-year 2024, streaming hours reached 127.1 billion, up 21.1 billion hours compared to 2023.
The Roku Channel, the company's ad-supported streaming service, continues to be a standout performer with streaming hours up 82% year over year. It now reaches U.S. households with approximately 145 million people and remains the #3 app on the Roku platform by both reach and engagement.
Diversified Revenue Streams Bolster Roku’s Growth Outlook
Roku's three-pronged strategy to grow Platform revenues is clearly working. First, the company is effectively leveraging its Home Screen, which serves as the lead-in to TV for U.S. households with more than 125 million people daily. Second, Roku is expanding third-party platform integrations to drive advertising demand. Third, the company is growing subscription revenues through both premium and direct-to-consumer subscriptions.
The advertising business performed exceptionally well in the fourth quarter, even excluding political ad spending, which represented approximately 6% of Platform revenues. The company is successfully diversifying its advertising base beyond traditional media and entertainment companies, with retail, automotive and other verticals showing strong growth.
ROKU Positive Financial Trajectory for 2025 and Beyond
For 2025, Roku expects total net revenues of $4.61 billion, representing 12% year-over-year growth. Platform revenues are anticipated to reach $3.95 billion, growing 12% year over year. Excluding political ad spending, this represents 15% growth, slightly above the 2024 rate.
Perhaps most importantly, Roku projects Adjusted EBITDA of $350 million for 2025, a 35% increase from 2024, demonstrating improving profitability as the company scales. Management has also provided a clear path to operating income positivity in 2026, a significant milestone for long-term investors.
The Zacks Consensus Estimate for 2025 revenues is pegged at $4.61 billion, suggesting 12.19% year-over-year growth. The consensus estimate is pegged at a loss of 80 cents per share. The company had incurred a loss of 89 cents per share in the year-ago period.
Image Source: Zacks Investment Research
Find the latest earnings estimates and surprises on Zacks Earnings Calendar.
Challenges and Concerns for ROKU
The streaming market is becoming increasingly crowded, with major players like Netflix (NFLX - Free Report) , Disney (DIS - Free Report) -owned Disney+ and Amazon (AMZN - Free Report) Prime Video continually expanding their offerings. This intensifying competition raises questions about Roku's ability to maintain its growth trajectory.
Additionally, Roku's stock might be considered expensive relative to its cash flow generation and industry peers, which could be a concern for investors focused on finding undervalued stocks. Roku’s two-year price-to-cash flow ratio of 89.92X is ahead of the Zacks Broadcast Radio and Television industry average of 30.4X.
Roku’s Price-to-Cash Flow Ratio Depicts Stretched Valuation
Image Source: Zacks Investment Research
Investment Thesis: Why Roku Looks Attractive for 2025
Roku presents a compelling investment opportunity for 2025 based on several fundamental strengths. The company has firmly established itself as the market leader in streaming, maintaining the #1 position by hours streamed across the U.S., Canada, and Mexico. Its impressive penetration of over half of U.S. broadband households provides a robust foundation for continued growth. This market dominance gives Roku significant leverage in negotiations with content providers and advertisers alike.
The company's financial trajectory is equally promising, with Platform gross margins expected to hold steady between 52-53% in 2025. Management has demonstrated strong fiscal discipline by projecting only mid-single-digit growth in operating expenses while still investing strategically in growth initiatives. This balanced approach should accelerate the path toward sustainable profitability, with operating income positivity targeted for 2026.
Roku's capital efficiency is another attractive element for potential investors. Management anticipates that free cash flow will exceed Adjusted EBITDA in 2025, providing the company with the flexibility to reinvest in the business, explore strategic acquisitions, or potentially return capital to shareholders in the future. This strong cash generation capability distinguishes Roku from many growth-oriented technology companies that struggle with cash burn even during expansion phases.
The international growth story further enhances Roku's investment appeal. While already dominant in North America, the company is methodically expanding its footprint in Latin America and the United Kingdom. These markets represent significant long-term growth opportunities as global streaming adoption continues to accelerate.
Conclusion
With streaming adoption continuing to accelerate globally and Roku positioning itself at the center of the streaming ecosystem, the company appears well-positioned to capitalize on both advertising and subscription revenue opportunities. For investors seeking exposure to the ongoing shift from traditional TV to streaming, Roku's strengthening financial profile and a clear path to profitability make it an attractive consideration for 2025 portfolios. Roku stock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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ROKU Exceeds $1B Mark in Q4 Platform Revenues: Time to Buy the Stock?
Roku, Inc. (ROKU - Free Report) delivered a stellar fourth-quarter 2024 results, marking a significant milestone as Platform revenues grew 25% year over year to $1.035 billion. This marks Roku's first-ever quarter exceeding the billion-dollar threshold for its high-margin Platform segment, demonstrating the company's successful strategy of monetizing its growing user base through advertising and content distribution.
The company reported narrower-than-expected losses and impressive revenue growth, prompting investors to send shares soaring 13% in after-hours trading following the announcement.
Roku reported a loss of 24 cents per share in the fourth quarter, narrower than the Zacks Consensus Estimate of a loss of 44 cents. The company had incurred a loss of 55 cents loss in the same quarter last year. Total revenues climbed 22% year over year to $1.2 billion, beating the consensus mark by 4.48%.
With the stock already up 42.5% in the past year, many analysts are asking: is it the right time to buy Roku shares?
1-Year Performance
Image Source: Zacks Investment Research
Growing User Base and Engagement Metrics of ROKU
Roku ended 2024 with 89.8 million streaming households globally, adding 4.3 million in the fourth quarter alone and 9.8 million for the full year. The company passed the 90 million milestone in early January 2025, and management anticipates continued strong growth both domestically and internationally.
Streaming hours, a key performance indicator of user engagement, increased 18% year over year to 34.1 billion hours in the fourth quarter. For full-year 2024, streaming hours reached 127.1 billion, up 21.1 billion hours compared to 2023.
The Roku Channel, the company's ad-supported streaming service, continues to be a standout performer with streaming hours up 82% year over year. It now reaches U.S. households with approximately 145 million people and remains the #3 app on the Roku platform by both reach and engagement.
Diversified Revenue Streams Bolster Roku’s Growth Outlook
Roku's three-pronged strategy to grow Platform revenues is clearly working. First, the company is effectively leveraging its Home Screen, which serves as the lead-in to TV for U.S. households with more than 125 million people daily. Second, Roku is expanding third-party platform integrations to drive advertising demand. Third, the company is growing subscription revenues through both premium and direct-to-consumer subscriptions.
The advertising business performed exceptionally well in the fourth quarter, even excluding political ad spending, which represented approximately 6% of Platform revenues. The company is successfully diversifying its advertising base beyond traditional media and entertainment companies, with retail, automotive and other verticals showing strong growth.
ROKU Positive Financial Trajectory for 2025 and Beyond
For 2025, Roku expects total net revenues of $4.61 billion, representing 12% year-over-year growth. Platform revenues are anticipated to reach $3.95 billion, growing 12% year over year. Excluding political ad spending, this represents 15% growth, slightly above the 2024 rate.
Perhaps most importantly, Roku projects Adjusted EBITDA of $350 million for 2025, a 35% increase from 2024, demonstrating improving profitability as the company scales. Management has also provided a clear path to operating income positivity in 2026, a significant milestone for long-term investors.
The Zacks Consensus Estimate for 2025 revenues is pegged at $4.61 billion, suggesting 12.19% year-over-year growth. The consensus estimate is pegged at a loss of 80 cents per share. The company had incurred a loss of 89 cents per share in the year-ago period.
Image Source: Zacks Investment Research
Find the latest earnings estimates and surprises on Zacks Earnings Calendar.
Challenges and Concerns for ROKU
The streaming market is becoming increasingly crowded, with major players like Netflix (NFLX - Free Report) , Disney (DIS - Free Report) -owned Disney+ and Amazon (AMZN - Free Report) Prime Video continually expanding their offerings. This intensifying competition raises questions about Roku's ability to maintain its growth trajectory.
Additionally, Roku's stock might be considered expensive relative to its cash flow generation and industry peers, which could be a concern for investors focused on finding undervalued stocks. Roku’s two-year price-to-cash flow ratio of 89.92X is ahead of the Zacks Broadcast Radio and Television industry average of 30.4X.
Roku’s Price-to-Cash Flow Ratio Depicts Stretched Valuation
Image Source: Zacks Investment Research
Investment Thesis: Why Roku Looks Attractive for 2025
Roku presents a compelling investment opportunity for 2025 based on several fundamental strengths. The company has firmly established itself as the market leader in streaming, maintaining the #1 position by hours streamed across the U.S., Canada, and Mexico. Its impressive penetration of over half of U.S. broadband households provides a robust foundation for continued growth. This market dominance gives Roku significant leverage in negotiations with content providers and advertisers alike.
The company's financial trajectory is equally promising, with Platform gross margins expected to hold steady between 52-53% in 2025. Management has demonstrated strong fiscal discipline by projecting only mid-single-digit growth in operating expenses while still investing strategically in growth initiatives. This balanced approach should accelerate the path toward sustainable profitability, with operating income positivity targeted for 2026.
Roku's capital efficiency is another attractive element for potential investors. Management anticipates that free cash flow will exceed Adjusted EBITDA in 2025, providing the company with the flexibility to reinvest in the business, explore strategic acquisitions, or potentially return capital to shareholders in the future. This strong cash generation capability distinguishes Roku from many growth-oriented technology companies that struggle with cash burn even during expansion phases.
The international growth story further enhances Roku's investment appeal. While already dominant in North America, the company is methodically expanding its footprint in Latin America and the United Kingdom. These markets represent significant long-term growth opportunities as global streaming adoption continues to accelerate.
Conclusion
With streaming adoption continuing to accelerate globally and Roku positioning itself at the center of the streaming ecosystem, the company appears well-positioned to capitalize on both advertising and subscription revenue opportunities. For investors seeking exposure to the ongoing shift from traditional TV to streaming, Roku's strengthening financial profile and a clear path to profitability make it an attractive consideration for 2025 portfolios. Roku stock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.