Roku, Inc.

Analysis of ROKU Stock

Technical Analysis ROKU has shown significant weakness, declining over 15% in one month and severely underperforming the broader market. Trading 24% below its 52-week high, the stock is in a corrective phase with high volatility, suggesting ongoing pessimism but not yet deeply oversold conditions.

Fundamentals Revenue grew 15.2% quarter-over-quarter in Q4, with net income margin expanding to 5.8%, indicating improving profitability. The company maintains strong liquidity and low debt, though operational efficiency metrics like asset turnover remain moderate, highlighting room for growth optimization.

Valuation The trailing P/E of 148 seems steep, but the forward P/E of 49.9 and a PEG ratio of 0.23 suggest the stock may be undervalued relative to its earnings growth potential. This reflects market expectations for rapid profit expansion, though the valuation remains premium.

Risk ROKU's high beta of 1.99 implies elevated volatility and susceptibility to market swings. Additional risks include advertising cyclicality and streaming competition, though healthy liquidity and lack of extreme short interest provide some stability.

Investment Recommendation

Buy – ROKU presents a compelling growth opportunity despite recent technical weakness. Strong revenue momentum, expanding profitability, and a reasonable PEG ratio indicate underlying value. Patient investors may benefit from the current discounted price if execution continues improving. However, the high volatility requires a tolerance for risk. *(Not investment advice, for reference only.)*

RockFlow Model Forecast: Three Scenarios for 2026

Based on the analysis provided, here is a 12-month outlook for ROKU:

Catalysts: Continued revenue growth momentum and expanding profit margins are key positives. The reasonable PEG ratio suggests the market is pricing in significant earnings expansion, which could drive the stock higher if the company meets or exceeds growth expectations.

Risks: The primary risks are the stock's high volatility (beta of 1.99) and its sensitivity to broader market swings, particularly given concerns around advertising cyclicality. The premium forward P/E also leaves little room for operational missteps or a slowdown in the streaming market.

Outlook: While analyst targets are unavailable, the fundamental picture supports a cautiously optimistic view for patient, risk-tolerant investors. The current price appears to discount recent technical weakness, but a sustained recovery hinges on ROKU maintaining its growth trajectory in a competitive landscape. Expect continued volatility with potential for appreciation if profitability improves as projected.

Wall Street Consensus

Most Wall Street analysts are optimistic about Roku, Inc.'s 12-month outlook, with consensus target around $89.61, indicating expected upside potential.

Overall, ROKU has investment potential but also faces challenges. Here are key factors to weigh before investing.

ROKU has demonstrated substantial weakness over both short and medium-term horizons, reflecting significant investor pessimism.

The stock has experienced sharp declines of over 15% over one month and 17% over three months, severely underperforming the broader market by approximately 17 percentage points; this substantial underperformance, combined with a beta of 1.99, confirms the stock's high volatility and recent negative momentum. The 1-year maximum drawdown of -42.48% further underscores the severity of recent selling pressure.

Currently trading at $88.58, Roku sits approximately 24% below its 52-week high, positioning it closer to the middle of its annual range than to either extreme; while not technically deeply oversold, the significant price retreat from recent highs suggests the stock is in a corrective phase rather than exhibiting overbought conditions.

Revenue & Profitability ROKU demonstrated strong sequential improvement in Q4 2025, with revenue growing 15.2% quarter-over-quarter to $1.39 billion. Profitability metrics improved significantly, with net income margin expanding from 2.0% in Q3 to 5.8% in Q4, driven by better operating leverage as revenue growth outpaced expense increases. The company appears to be transitioning toward more sustainable profitability after a period of aggressive investment.

Financial Health The company maintains a robust liquidity position with a current ratio of 2.75 and cash ratio of 1.28, indicating ample short-term financial flexibility. ROKU's debt levels remain conservative with a debt ratio of just 19.7% and strong interest coverage of 118x, though the cash flow to debt ratio of 0.26 suggests moderate capacity for debt servicing from operating cash flows.

Operational Efficiency ROKU shows moderate operational efficiency with an asset turnover of 0.31 and return on equity of 3.0%, indicating room for improvement in generating returns from its asset base. The 52-day cash conversion cycle reflects efficient working capital management, while the fixed asset turnover of 3.21 suggests reasonable utilization of property and equipment investments.

Based on the trailing PE ratio of 148.12, ROKU appears significantly overvalued on a static earnings basis. However, the forward PE of 49.9, which incorporates future growth expectations, presents a more reasonable picture. This substantial divergence highlights the market's anticipation of sharply improved profitability, a view further supported by the very low PEG ratio of 0.23, which suggests the stock may be undervalued relative to its earnings growth potential.

A direct peer comparison is not feasible without industry average data. However, the elevated EV/EBITDA of 184.1 and a forward PE near 50 typically indicate a premium valuation, often assigned to companies in high-growth sectors expected to rapidly expand their earnings and cash flow. The key investment thesis hinges on ROKU's ability to meet or exceed the aggressive growth expectations embedded in these forward-looking metrics.

Volatility Risk: ROKU exhibits high volatility risk with a Beta of 1.99, indicating the stock is approximately twice as volatile as the broader market. This is corroborated by a substantial maximum drawdown of -42.48% over the past year, highlighting its significant price fluctuation and potential for sharp losses during market downturns.

Other Risks: While the absence of notable short interest suggests a lack of concentrated bearish sentiment, the stock remains exposed to sector-specific risks, including cyclical advertising demand and intense competition in the streaming platform industry. Liquidity is generally adequate for a stock of its size, but the high volatility inherently elevates execution risk for trades.