Roku’s powerful fundamentals make it a buy

At the moment several factors indicate: Rokus (NASDAQ:YEAR) company is growing rapidly. And given the company’s status as a potential takeover target, ROKU stock continues to look very attractive.

A purple Roku (ROKU) sign is depicted on a wall in Los Gatos, California.

Source: JHVEPhoto / Shutterstock.com

Investors seem to be buying up shares of larger, more stable technology stocks. The company’s shares have declined as a result, creating a very good buying opportunity. With its strong recent performance, ROKU stock should generally outperform in this market environment.

A fast growing company

In a recent interview, Roku’s vice president of advertising revenue and marketing solutions said Alison Levin discussed the company’s advertising plans for the year. She said that while Roku expected strong ad sales upfront, the company’s actual advertising revenue was already higher than expected.

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In fact, the “advance spend commitments” increased by more than 100% year-on-year (YOY). Over 42% of marketers who bought ads during the prior period bought their very first ads on Roku.

In the first quarter, Roku’s total revenue increased by 79% YOY and gross profit increased by 132% YOY.

On another note, if InvestorPlace’s Luke Lango reported in June, The Roku channel hit its all-time high in May thanks to its new original programming. In the meantime, Apple (NASDAQ:AAPL) agreed to pay Roku to put Apple+, the streaming service from the software giant, on Roku’s remotes.

Taken together, all of this information points to a strong growth trend in the company’s revenue.

ROKU stock is a potential takeover target

In a previous article I suggested that Apple would Roku. need to buy. While there’s no evidence that Tim Cook is considering the move (shockingly, he hasn’t even called me to discuss the column), another major company is reportedly considering the transaction.

That company is Comcast (NASDAQ:CMCSA), whose cable TV business is slowly fading, like that of his peers. Indeed, according to The Wall Street Journal (WSJ), is buying Roku “on the table” for the cable giant.

although Comcast reportedly called the WSJ article “pure speculation”, I think any company with a huge amount of cash and a streaming company could – and should – buy Roku. Except Apple and Comcast, Disney (NYSE:DIS) could be another potential suitor for the company.

Navalier, Lango and Deustche Bank are Roku Bulls

In June, Venerable InvestorPlace contributor Louis Navalier noted: that Roku’s average revenue per user is “consistently on the rise.” He wrote that the streaming operating system was “in a strong position” and optimistic about the ROKU stock.

Lango has also been consistently optimistic about Roku. In his aforementioned June article, he said the company’s original programs are “a hit” and that they could generate “a lot of money” for the company.

German Bank seems to agree with their feelings. Last month, it maintained its “buy” rating on ROKU stock. Deutsche Bank predicted that the company’s public would “hold up well” in the second quarter.

ROKU Shares to Enjoy a Favorable Technology Market

In general, in recent weeks, investors have been buying large, established technology names and selling smaller, higher-valued technology stocks. As proof of that trend Barron’s listed on July 13 that larger tech stocks like Apple “all hit intraday highs on the same day.”

Since Roku is quite well established as a leader in streaming operating systems, ROKU stocks should outperform the Nasdaq as long as this trend continues. Combined with its strong growth and leverage in the high-growth industry, ROKU stock can rise in the long run.

On the other hand, the company could easily become a takeover target in the short term. Anyway, in light of all these points, investors should buy ROKU stock.

At the date of publication, Larry Ramer was long in Roku.

Larry Ramer has spent 13 years researching and writing articles on US stocks. He was employed by The Fly and Israel’s largest business newspaper, Globes. Larry started writing columns for InvestorPlace in 2015. His highly successful, contrarian picks included GE, solar stocks and Snap. You can reach him on StockTwits at @larryramer.

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