Millions of people have opted to migrate to streaming services this year and one of the companies to have benefitted considerably due to that development has been Roku (NASDAQ:ROKU). The company has grown considerably in 2020 in light of soaring streaming and its revenues have grown strongly as well. Perhaps it is time to figure out if the stock is worth buying or not.
Reasons for Optimism
More and more people are now turning to streaming services for their entertainment needs. A recent poll showed that as many as 85% of Americans (2000 polled) own some sort of a streaming device. In Q2 2020, Roku recorded platform revenue growth of as much as 46% year on year.
On top of that, platform revenues made up as much as 69% of the total revenues generated by Roku. At the end of the second quarter, Roku boasted of as many as 43 million active accounts, which reflects a year on year rise of as much as 41%.
The rise in the number of active users is a major development for Roku and the continued shift to streaming is expected to contribute to this rise further in the near future.
In recent times, there has been a considerable thrust towards digital advertising from brands and that has been another major positive for Roku.
The company acquired Dataxu in order to boost its advertising revenues and in the second quarter, the average revenue per use (ARPU) soared 18% year on year. In addition to that, Roku’s advertising business grew by as much as 346% year on year in the second quarter.
The company stated that considerable growth is due to the shift in advertisers’ attitudes towards social media spending. Despite the digital marketing space having shrunk due to the coronavirus pandemic, Roku managed to grow in this segment.
There is another important factor that could make the Roku stock particularly attractive to investors. The number of streaming platforms has gone up considerably in recent times and Roku offers a device from which a user can stream all of those.
In other words, the company is an essential cog in the wheel for streaming platforms and as the number of platforms keeps rising, the importance of Roku will keep rising as well. In such a situation, it is important for investors to perhaps keep the Roku stock on their watch lists.
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