Roku (NASDAQ: ROKU) is the leading streaming platform in the U.S. by hours watched, with 87.4 billion hours of content streamed in 2022. The company’s operating system powers not only its own devices, but also co-branded TVs and soundbars from manufacturers like TCL, Onn, and Hisense. Roku generates revenue from advertising, distribution fees, hardware sales, OS licensing, and subscription sales.

Despite its strong position in the streaming market, Roku stock has been under pressure lately, falling 40% from its all-time high of $110.56 in February. The main reasons for the decline are the slowdown in user growth, the lower revenue per user, and the uncertainty in the advertising market due to the pandemic. However, these challenges are likely to be temporary, and Roku has several long-term growth drivers that make it an attractive investment opportunity. Here are some of them:

• Increasing adoption of streaming services. According to eMarketer, the number of U.S. households with at least one streaming service will grow from 104.8 million in 2020 to 126.6 million in 2024, representing a compound annual growth rate (CAGR) of 4.8%. Roku is well-positioned to benefit from this trend, as it offers access to over 500,000 movies and TV episodes from thousands of free and paid channels, including popular services like Netflix, Disney+, Hulu, Amazon Prime Video, HBO Max, and Peacock. Roku also has its own ad-supported channel, The Roku Channel, which features live and on-demand content from over 190 partners.
• Expanding international presence. Roku has been expanding its footprint outside the U.S., where it faces less competition from rivals like Amazon Fire TV and Google Chromecast. The company currently operates in 27 countries across North America, Latin America, Europe, and Asia-Pacific, and plans to launch in more markets in the future. Roku has also partnered with local content providers and TV manufacturers to offer localized versions of its platform and devices. For example, in Brazil, Roku has teamed up with Globoplay, the leading streaming service in the country, to offer a co-branded streaming stick. In India, Roku has partnered with TCL and Onida to sell Roku-powered smart TVs.
• Growing monetization opportunities. Roku has been improving its ability to monetize its large and engaged user base through various revenue streams. The company’s platform revenue, which includes advertising, distribution fees, OS licensing, and subscription sales, grew 71% year over year in 2022, outpacing its hardware revenue growth of 32%. Roku’s average revenue per user (ARPU) increased 24% year over year to $28.76 in 2022, driven by higher ad impressions, higher-priced inventory, and increased adoption of premium subscriptions. Roku expects its ARPU to rebound in 2023 as the ad market recovers from the pandemic-induced slowdown.

In conclusion, Roku is a leader in the fast-growing streaming industry, with a loyal and active user base, a diversified revenue mix, and a global expansion strategy. The company’s stock is trading at a reasonable valuation of 9 times its expected sales for 2023, compared to its historical average of 12 times. Therefore, investors looking for a long-term growth opportunity should consider buying Roku stock now.