Buy Roku Stock at a 'Discount' on Disney, Apple & Streaming TV Growth?

Roku ROKU stock has already recovered from its post-Q3 earnings release selloff last week after bullish streaming TV investors snatched up a perceived buying opportunity. Plus, Apple AAPL and Disney DIS have both entered the streaming TV market in November.

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Roku stock slipped after it posted its Q3 fiscal 2019 financial results on November 6. The drop was likely due to worries about the company’s reported adjusted loss, which did top our estimates (-$0.22 vs. -$0.28) but marked a downturn from the year-ago period. Yet most investors seem to be more than okay with Roku’s losses as it expands its business and grows its top line in an industry that is really just getting started.

Roku became famous for its small devices that plug into TVs and allow users to watch various streaming TV content from the likes of Netflix NFLX and countless others. Today, the firm’s operating system is built into a slew of smart TVs ands its devices boast a larger market share than rivals such as Amazon AMZN and Google GOOGL. And the company estimated that Roku TV “represented more than one in three smart TVs sold in the U.S.” through the first three quarters of the year.

More recently, Roku rolled out its own set of speakers. Plus, the firm has expanded its advertising-focused business through of its Roku Channel that allows users to watch free streaming movies and TV shows. Most importantly, the company sells advertising across its marketplace, enabling marketers to buy targeted ads and more.

With all of this in mind, the company’s Q3 revenue soared 50% from the year-ago period to $260.9 million, while its ad-heavy platform revenue jumped a whopping 79%—which came on top of the year-ago period’s 74% expansion. Platform revenue accounted for 69% of total Q3 sales, compared to 58% in Q3 2018.

Meanwhile, the company added 1.7 million accounts to close with 32.3 million, with average revenue per user up 30%. The firm also noted that its monetized video ad impressions “again more than doubled YoY.”

And just two days after it reported its quarterly results, the company announced that it completed its purchase of Dataxu. “Acquiring Dataxu is a natural progression of our ad tech strategy to offer more buy-side tools and to provide the industry’s best holistic TV plus OTT planning and buying solution that delivers better results for TV buyers,” Roku’s senior VP of Platform Business Scott Rosenberg said in prepared remarks.

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Roku and firms such as The Trade Desk TTD stand to benefit from the continued transition from traditional pay-TV to connected TV, because despite today’s heavily subscription-based environment, there will be a slew of ad-supported platforms. Advertisers will always pay to get in front of users and company’s will always pay to promote their service.

And the streaming wars are really just getting started, with Disney and Apple joining the fray just this month. Next year, Comcast CMCSA and NBCUniversal will launch Peacock and AT&T T will roll out its beefed-up HBO Max. “Such new services will generate revenue for Roku when we promote their content to our customers, when customers sign up on our platform and when our customers view ads,” Roku wrote in prepared Q3 remarks.

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