Roku (ROKU 12.97%) reported its 2025 first-quarter financial results not long ago. Revenue of just over $1 billion and the loss per share of $0.19 both came in ahead of Wall Street estimates. Nonetheless, shares are 9% lower than the day of the announcement (as of May 9).
As of this writing, this streaming stock trades at an alarming 87% below its record, established in July 2021. Despite the poor performance, investors might find reasons to be bullish on the company.
Should you buy Roku shares today with $500 and hold them for 10 years?
Image source: Getty Images.
Solid business momentum
Roku’s revenue jumped 16% year over year in Q1, driven by a strong 17% bump in platform sales, which represent 86% of the overall business. On the other side, device revenue climbed 11%, helping the Roku operating system get into more households.
Roku remains the top smart TV in North America. “In the U.S., the Roku TV OS represented nearly 40% of TV units sold, which is greater than those of the No. 2 and No. 3 selling TV operating systems combined,” the Q1 2025 shareholder letter reads. That’s a superb data point that highlights the company’s dominance.
Streaming hours totaled a whopping 35.8 billion in the first quarter, demonstrating robust engagement. This drives valuable ad revenue. Advertising activity on the Roku platform performed better than the overall U.S. over-the-top market.
Historically, Roku has struggled to reach profitability. This is going to change. According to the leadership team, the business should generate positive operating income in 2026.
Benefiting from two secular tailwinds
It’s nice to own a company that’s riding one powerful secular trend. It’s even better to own a business that is benefiting from multiple ones. Roku falls into the latter category.
Of course, there’s the ongoing cord-cutting trend, with consumers opting for the value and convenience of streaming entertainment over traditional cable TV. And given the huge number of services on the market, having a way to aggregate everything the way Roku does is incredibly valuable.
Digital advertising is another growth vector. The popularity of ad-based streaming subscription tiers, especially from Netflix and Walt Disney, reveals the monetization opportunities available to a streaming platform like Roku. As more advertisers look to target a captive streaming audience, the business should see higher revenue potential in the years ahead.
Risks to keep in mind
Investors looking for exposure to the streaming industry might find Roku an appealing candidate. However, you need to keep some risks in mind.
Competition is one factor. As a streaming platform, just think of the rivals in the industry, all vying for a piece of viewer attention and ad spending. Roku goes up against the likes of Alphabet (YouTube), Amazon, and Apple. All these tech giants have expertise in advertising, and they all offer streaming devices and streaming services. Roku has clearly defended itself well to get to its current position, but it must constantly operate at the top of its game.
Roku’s management is optimistic about the business getting to operating profitability next year. However, success here is far from guaranteed. Investors will want to see not only consistently positive earnings, but an expanding bottom line that demonstrates a scalable business model that works.
The stock’s valuation might already reflect these risks. As of this writing, the stock trades at a price-to-sales ratio of under 2.1. That’s 77% below the historical average, showcasing the market’s pessimism toward the company. Making a $500 investment now with the intention to hold for 10 years might end up being a smart financial move.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Neil Patel and his clients have positions in Walt Disney. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Netflix, Roku, and Walt Disney. The Motley Fool has a disclosure policy.