Roku and Spotify: Undervalued Growth Stocks Worth Buying
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 48 minutes ago
0mins
Should l Buy ROKU?
Source: Fool
- Roku's Market Position: Roku commands a strong position in the streaming market with over 100 million households on its platform, driving a 28% year-over-year growth in platform revenue, despite a 74% decline from its pandemic peak, indicating robust advertising revenue potential.
- Subscription Revenue Growth: Roku's subscription revenue increased by 30% year-over-year, benefiting not only from advertising but also from a share of third-party subscriptions, highlighting its value as a key distribution platform in the streaming market.
- Spotify User Growth: Spotify's monthly active users grew by 12% year-over-year, with a 10% increase in subscription revenue pushing total revenue up by 8%, showcasing its strong performance in the digital music market.
- AI-Driven Margin Improvement: Spotify's gross margin has risen from 24% to 32% by leveraging listening data from 761 million users and introducing new AI features, enhancing user engagement and driving cash flow growth, indicating significant future profitability potential.
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Analyst Views on ROKU
Wall Street analysts forecast ROKU stock price to fall
23 Analyst Rating
19 Buy
4 Hold
0 Sell
Strong Buy
Current: 126.670
Low
100.00
Averages
123.10
High
145.00
Current: 126.670
Low
100.00
Averages
123.10
High
145.00
About ROKU
Roku, Inc. is a TV streaming platform in the United States, Canada, and Mexico. The Company connects viewers to the content they love, enables content publishers to build and monetize audiences through advertising and subscriptions, and provides advertisers with capabilities to reach and engage consumers. The Company's segments include Advertising, Subscriptions, and Devices. The Company's Advertising segment includes the sale of digital advertising, including direct and programmatic video advertising, ads integrated into its user interface (UI), and related services. The Company's Subscriptions segment includes the sale of subscriptions to end users. The Company's Devices segment includes the sale of streaming players, Roku-made TVs, smart home products and services, audio products, and related accessories. The Company also owns and operates The Roku Channel, the home of premium and free entertainment; Howdy, a low-cost subscription service; and Frndly TV, a live TV streaming service.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Roku and Spotify: Undervalued Growth Stocks Worth Buying
- Roku's Market Position: Roku commands a strong position in the streaming market with over 100 million households on its platform, driving a 28% year-over-year growth in platform revenue, despite a 74% decline from its pandemic peak, indicating robust advertising revenue potential.
- Subscription Revenue Growth: Roku's subscription revenue increased by 30% year-over-year, benefiting not only from advertising but also from a share of third-party subscriptions, highlighting its value as a key distribution platform in the streaming market.
- Spotify User Growth: Spotify's monthly active users grew by 12% year-over-year, with a 10% increase in subscription revenue pushing total revenue up by 8%, showcasing its strong performance in the digital music market.
- AI-Driven Margin Improvement: Spotify's gross margin has risen from 24% to 32% by leveraging listening data from 761 million users and introducing new AI features, enhancing user engagement and driving cash flow growth, indicating significant future profitability potential.
See More
Roku and Spotify's Growth Potential
- Roku User Growth: Roku's platform now reaches over 100 million households, driving a 28% year-over-year increase in advertising revenue, indicating its strengthening competitive position in the streaming market and laying the groundwork for future revenue growth.
- Advertising Revenue Boost: Roku's ad-supported content has become the second most popular app on its platform, further enhancing its distribution capabilities in the streaming industry while generating additional advertising revenue and user engagement.
- Spotify User Growth: Spotify's monthly active users grew by 12% year-over-year, with subscription revenue increasing by 10%, contributing to an 8% year-over-year rise in total revenue, showcasing its strong performance and market potential in the digital music space.
- AI-Driven Margin Improvement: Spotify's gross margin has risen from 24% to 32%, with new AI features like AI DJ and personalized recommendations expected to further enhance user engagement, driving future cash flow growth and margin expansion.
See More
Roku's Strong Earnings Propel Stock Momentum
- Significant Revenue Growth: Roku's Q1 platform revenue surged 28% year-over-year to $1.13 billion, with ad and subscription revenues increasing by 27% and 30% respectively, indicating strong performance in the streaming ad market and expected further revenue growth.
- Record Advertising Gross Margin: Roku's advertising gross margin hit a new high of 60.5%, up 450 basis points year-over-year, driven by the introduction of higher-margin ad solutions, which not only improved profitability but also strengthened its position in the competitive advertising market.
- Surge in Adjusted EBITDA: Roku's adjusted EBITDA skyrocketed 165% year-over-year to $148.4 million, exceeding the $130 million guidance, showcasing effective strategies in cost control and revenue growth, which further boosts investor confidence.
- Optimistic Future Outlook: Roku projects a 20% increase in platform revenue for Q2 and raised its full-year platform revenue guidance by $110 million to $5 billion, reflecting confidence in future growth and indicating its sustained competitiveness in the streaming industry.
See More
GameStop Makes $20 Billion Bid for eBay
- Acquisition Proposal: GameStop has launched a non-binding bid to acquire eBay at $125 per share, valuing the company approximately 20% above its Friday close, which could enhance its competitive position in the market.
- Funding Assurance: GameStop has secured around $20 billion in debt financing to support its acquisition efforts, a funding level that is four times its market cap, demonstrating strong confidence in the success of the bid.
- Cost Savings Expectations: CEO Ryan Cohen anticipates that if the acquisition goes through, it could yield $2 billion in annual savings within 12 months, further enhancing the company's profitability.
- Market Reaction: eBay's stock rose about 8% in pre-market trading, although it still falls short of GameStop's offer, indicating a positive market response to the acquisition proposal, which may influence the future stock performance of both companies.
See More
Roku Surpasses Q1 Expectations, Stock Rises
- Strong Performance: Roku's Q1 total net revenue increased by 22% year-over-year to $1.25 billion, exceeding management's $1.2 billion outlook, indicating robust demand in both advertising and subscription revenues, particularly with platform revenue growing 28% to $1.13 billion.
- Profitability Improvement: Roku's net income reached $86 million, a significant turnaround from a $27 million loss in the same quarter last year, while adjusted EBITDA surged 165% to $148 million, showcasing effective cost management and revenue growth that boosts investor confidence.
- User Growth: Roku surpassed 100 million streaming households globally, with streaming hours rising 8% to 38.7 billion, demonstrating an expanding user base and increased market penetration that lays a solid foundation for future revenue growth.
- Outlook Adjustment: Management raised full-year platform revenue guidance by over $100 million, now targeting nearly 21% growth, and expects Q2 total revenue to be about $1.3 billion with platform growth of roughly 20%, reflecting optimism about future market conditions despite competitive pressures and valuation concerns.
See More
Roku Reports 28% Year-Over-Year Growth in Q1 Platform Revenue
- Significant Revenue Growth: Roku's total net revenue for Q1 rose 22% year-over-year to $1.25 billion, surpassing management's $1.2 billion outlook, indicating strong performance in a competitive streaming market.
- Accelerated Platform Revenue: Platform revenue increased by 28% year-over-year to $1.13 billion, a notable jump from 17% growth in Q3 2025 and 18% in Q4, reflecting robust growth in both advertising and subscription revenues.
- Profitability Improvement: Roku reported a net income of $86 million, a significant turnaround from a $27 million loss in the same quarter last year, while adjusted EBITDA surged 165% to $148 million, showcasing enhanced operational efficiency.
- User Base Expansion: Roku surpassed 100 million streaming households globally in April, with streaming hours increasing by 8% to 38.7 billion hours, further solidifying its leadership position in the global streaming market.
See More
Roku and Spotify: Undervalued Growth Stocks Worth Buying
- Roku's Market Position: Roku commands a strong position in the streaming market with over 100 million households on its platform, driving a 28% year-over-year growth in platform revenue, despite a 74% decline from its pandemic peak, indicating robust advertising revenue potential.
- Subscription Revenue Growth: Roku's subscription revenue increased by 30% year-over-year, benefiting not only from advertising but also from a share of third-party subscriptions, highlighting its value as a key distribution platform in the streaming market.
- Spotify User Growth: Spotify's monthly active users grew by 12% year-over-year, with a 10% increase in subscription revenue pushing total revenue up by 8%, showcasing its strong performance in the digital music market.
- AI-Driven Margin Improvement: Spotify's gross margin has risen from 24% to 32% by leveraging listening data from 761 million users and introducing new AI features, enhancing user engagement and driving cash flow growth, indicating significant future profitability potential.
See More
Roku and Spotify's Growth Potential
- Roku User Growth: Roku's platform now reaches over 100 million households, driving a 28% year-over-year increase in advertising revenue, indicating its strengthening competitive position in the streaming market and laying the groundwork for future revenue growth.
- Advertising Revenue Boost: Roku's ad-supported content has become the second most popular app on its platform, further enhancing its distribution capabilities in the streaming industry while generating additional advertising revenue and user engagement.
- Spotify User Growth: Spotify's monthly active users grew by 12% year-over-year, with subscription revenue increasing by 10%, contributing to an 8% year-over-year rise in total revenue, showcasing its strong performance and market potential in the digital music space.
- AI-Driven Margin Improvement: Spotify's gross margin has risen from 24% to 32%, with new AI features like AI DJ and personalized recommendations expected to further enhance user engagement, driving future cash flow growth and margin expansion.
See More
Roku's Strong Earnings Propel Stock Momentum
- Significant Revenue Growth: Roku's Q1 platform revenue surged 28% year-over-year to $1.13 billion, with ad and subscription revenues increasing by 27% and 30% respectively, indicating strong performance in the streaming ad market and expected further revenue growth.
- Record Advertising Gross Margin: Roku's advertising gross margin hit a new high of 60.5%, up 450 basis points year-over-year, driven by the introduction of higher-margin ad solutions, which not only improved profitability but also strengthened its position in the competitive advertising market.
- Surge in Adjusted EBITDA: Roku's adjusted EBITDA skyrocketed 165% year-over-year to $148.4 million, exceeding the $130 million guidance, showcasing effective strategies in cost control and revenue growth, which further boosts investor confidence.
- Optimistic Future Outlook: Roku projects a 20% increase in platform revenue for Q2 and raised its full-year platform revenue guidance by $110 million to $5 billion, reflecting confidence in future growth and indicating its sustained competitiveness in the streaming industry.
See More
GameStop Makes $20 Billion Bid for eBay
- Acquisition Proposal: GameStop has launched a non-binding bid to acquire eBay at $125 per share, valuing the company approximately 20% above its Friday close, which could enhance its competitive position in the market.
- Funding Assurance: GameStop has secured around $20 billion in debt financing to support its acquisition efforts, a funding level that is four times its market cap, demonstrating strong confidence in the success of the bid.
- Cost Savings Expectations: CEO Ryan Cohen anticipates that if the acquisition goes through, it could yield $2 billion in annual savings within 12 months, further enhancing the company's profitability.
- Market Reaction: eBay's stock rose about 8% in pre-market trading, although it still falls short of GameStop's offer, indicating a positive market response to the acquisition proposal, which may influence the future stock performance of both companies.
See More
Roku Surpasses Q1 Expectations, Stock Rises
- Strong Performance: Roku's Q1 total net revenue increased by 22% year-over-year to $1.25 billion, exceeding management's $1.2 billion outlook, indicating robust demand in both advertising and subscription revenues, particularly with platform revenue growing 28% to $1.13 billion.
- Profitability Improvement: Roku's net income reached $86 million, a significant turnaround from a $27 million loss in the same quarter last year, while adjusted EBITDA surged 165% to $148 million, showcasing effective cost management and revenue growth that boosts investor confidence.
- User Growth: Roku surpassed 100 million streaming households globally, with streaming hours rising 8% to 38.7 billion, demonstrating an expanding user base and increased market penetration that lays a solid foundation for future revenue growth.
- Outlook Adjustment: Management raised full-year platform revenue guidance by over $100 million, now targeting nearly 21% growth, and expects Q2 total revenue to be about $1.3 billion with platform growth of roughly 20%, reflecting optimism about future market conditions despite competitive pressures and valuation concerns.
See More
Roku Reports 28% Year-Over-Year Growth in Q1 Platform Revenue
- Significant Revenue Growth: Roku's total net revenue for Q1 rose 22% year-over-year to $1.25 billion, surpassing management's $1.2 billion outlook, indicating strong performance in a competitive streaming market.
- Accelerated Platform Revenue: Platform revenue increased by 28% year-over-year to $1.13 billion, a notable jump from 17% growth in Q3 2025 and 18% in Q4, reflecting robust growth in both advertising and subscription revenues.
- Profitability Improvement: Roku reported a net income of $86 million, a significant turnaround from a $27 million loss in the same quarter last year, while adjusted EBITDA surged 165% to $148 million, showcasing enhanced operational efficiency.
- User Base Expansion: Roku surpassed 100 million streaming households globally in April, with streaming hours increasing by 8% to 38.7 billion hours, further solidifying its leadership position in the global streaming market.
See More
