This bargain-bin stock still dominates streaming
Jamie Louko (Roku): As of Sept. 7, 2022, Roku is the largest holding across all of ARK Invest’s ETFs. Cathie has been actively adding to her position in the stock over the past few months too. Since July 29, ARK Invest bought more than 470,000 shares of Roku stock, likely because it trades at just three times sales -- close to its lowest valuation ever since coming public.
The company isn’t cheap for no reason, however. Roku struggled in its second quarter, posting just 18% year-over-year revenue growth. Why? Businesses are cutting back on spending as budgets tighten, and advertising is an easy place to do so. What’s even more disappointing is that the company sees continued headwinds ahead for the rest of the year: In Q2, the company gave Q3 guidance that projects just 3% revenue growth on a year-over-year basis.
That said, Cathie Wood and ARK Invest look for long-term opportunities. On that front, Roku still looks exciting. Streaming continues to gain steam, with U.S. consumers aged 18 to 49 spending 50% of their TV time streaming, up from 40% in 2020. While consumers spend half of their time streaming, however, only 22% of TV ad budgets go towards it. Considering Roku is the largest streaming platform in terms of hours streamed in the U.S., Canada, and Mexico, the company has the potential to capitalize on this opportunity as advertisers ultimately shift more of their budgets towards streaming.
The most prominent risk to Roku is that it loses its leadership status and thus its spot as the preferred platform for advertisers to buy ad inventory. The company faces competition from multiple players, from Apple (AAPL -0.20%) to VIZIO (VZIO). That said, Roku doesn’t see any signs of its leadership slowing down. The company has more than 63 million active accounts, which jumped 14% year over year, and the number of hours streamed on its platform also increased steadily to 20.7 billion.
While the short term looks rough for this streaming stock, the long-term tailwinds pushing it forward are still in full swing. That’s likely why Cathie Wood is adding to her position, and you might want to consider following suit.
