The uptrend in shares of streaming TV platform Roku (NASDAQ:ROKU) refuses to stop. A year ago, this was a $100 stock. Today, the ROKU stock price clocks in above $450, with shares heading higher today after the company reported blockbuster fourth-quarter numbers.
That’s the good news for shareholders. But here’s the better news for folks who have yet to buy ROKU stock: This one is just going to keep on pushing higher.
Roku is turning into the globally ubiquitous “cable box of streaming TV”. In essence, by 2030 — when everyone is watching all their media through streaming TV — most folks in the world will be accessing those services through the Roku operating system.
That means this platform will one day have hundreds of millions of active accounts. Today, it has just 50 million active accounts. And the company is barely scratching the surface when it comes to monetizing those accounts, since the bulk of TV ad dollars ($160 billion, to be exact) are still sitting in the linear TV channel, just waiting to chase eyeballs into the streaming channel.
Big picture? Roku is still in the first inning of turning into the global cable box of streaming TV. Over the next several years, the company’s user base, revenues, profits, and stock price will all soar.
Here’s a deeper look.
Great Quarterly Numbers
Roku’s fourth-quarter earnings report was great, as every import key performance metric accelerated in the last three months of 2020.
The company added 5.2 million active accounts in the quarter — the most ever. The use base grew by nearly 40% year-over-year, on-par with previous quarter growth rates. Streaming hours rose 45% year-over-year, leading to average revenue per user growth of 24% — the company’s best ARPU growth rate since Covid-19 struck.
Revenues rose 58% year-over-year — its third-best revenue growth rate as public company. Player gross margins expanded 310 basis points. Platform gross margins expanded 130 basis points. Opex dollars only rose 34% year-over-year, against the backdrop of nearly 60% revenue growth, leading to 14 points of EBITDA margin expansion. EBITDA dollars rose by 650% year-over-year. Yes. You read that right. 650% EBITDA growth.
From head to toe, the earnings report was awesome. It broadly underscored that, thanks to the Covid-19 pandemic accelerating the shift toward CTV, Roku is firing on all cylinders today.
This momentum will persist for the foreseeable future. So will the uptrend in ROKU stock.
All the Right Moves
More important than the quarterly numbers, Roku is making all the right moves today to ensure that the company remains the best-in-class operating system in the streaming TV world.
Roku got to where it is today — the most dominant streaming TV ecosystem in the world — by creating the industry’s most intuitive and user-friendly OS. The launch of Roku OS 9 only builds on this central value prop, with new features like a live TV channel guide that continue to make the Roku OS the best OS in the game.
Meanwhile, Roku continues to leverage its best-in-class OS to grow its Roku TV business. Not surprisingly, because the ROKU OS is so good, that TV makers that are partnering with Roku to make Roku TVs are gaining market share. That’s a favorable dynamic, which means that more and more TV makers will partner with Rou going forward (they want to gain market share, too).
Roku’s software innovations are also impressive. The in-house Roku Channel continues to acquire more content, which is driving higher engagement. In the quarter, the Roku Channel reached U.S. households with an estimated 63 million people, up more than 100% year-over-year. At the same time, the company’s new Roku Pay ecosystem (in which consumers can just enter payment info once and seamlessly subscribe-to/buy anything through Roku) is a step in the right direction toward improving functionality of the Roku OS.
On the ad tech side, Roku’s rebranded OneView Ad Platform is getting better and better by the day, with more and more functionalities and capabilities related to targeted advertising. This is leading to increased spend through OneView.
And, finally, Roku continues to expand internationally. In 2020, Roku TV was the top-selling smart TV OS in Canada. In Brazil, the company continues to make progress, while in Mexico, Roku increased the number of Roku TV brands from three to seven. Meanwhile, in the UK, the Roku Channel added Premier League games to its content suite.
These are all great developments. And they all broadly underscore one thing: ROKU stock is a winner.
Bottom Line on ROKU Stock
ROKU stock is one of the best long-term growth stocks in the market today. Over the next decade, it will head way, way higher.
But it’s not the best growth stock to buy today.
Instead, the best growth stock to buy today is a company that reminds me of a young Amazon (NASDAQ:AMZN). Indeed, I think buying this stock today could be like buying AMZN stock back in 1997 — before it soared thousands of percent.
Which stock am I talking about?
Click here to find out.
P.S. If you’ve been following my work, you know I’m extremely bullish on innovation. And right now, we have rarely seen such opportune moments throughout history to invest in innovation.
While I have many stocks on my watch list that excite me, there’s one stock in particular that I’m absolutely giddy about. And I’ll be giving this stock pick away – for FREE – at my first-ever Exponential Growth Summit on Feb. 23, at 4 p.m. EST.
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On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
By uncovering early investments in hypergrowth industries, Luke Lango puts you on the ground-floor of world-changing megatrends. It’s how his Daily 10X Report has averaged up to a ridiculous 100% return across all recommendations since launching last May. Click here to see how he does it.