At roughly $89 a share, Roku (NASDAQ: ROKU) trades for barely half of the $174 intrinsic value that the most optimistic discounted‑cash‑flow model pins on it, a 49% markdown investors rarely get on a fast‑growing platform name.
The gap begs a simple question of whether Wall Street asleep at the wheel, or is Roku’s apparent bargain a value trap?
We dig into the numbers, the catalysts most people aren’t talking about, and the very real risks that come with this high‑beta streamer.
Temperature Check
Management is slated to report second‑quarter results after the bell on July 30. Consensus calls for about $1.07 billion in revenue and a $0.27 loss per share, both improvements over last year.
The street is laser‑focused on two metrics, the first being platform revenue growth, which now accounts for 86% of the top line, and the second is adjusted EBITDA, guided at a healthy $70 million for Q2.
If Roku clears those bars, history says the stock can sprint, such as when the company smashed expectations in late 2023, shares rocketed 30% in a single session.
What The Price Hides
Roku is often pigeon‑holed as a “device” maker, but hardware is just Trojan‑horse economics. The installed base, 81.6 million active accounts as of Q2 2024, feeds an ad‑tech flywheel that generated 17% platform‑segment growth in Q1 2025 even while broader digital video spending slowed.
Behind that headline growth are two under‑appreciated levers, the first being small‑business onboarding. Roku quietly opened self‑serve tools to SMBs last winter. CFO Dan Jedda told analysts that “non‑Fortune 500” advertisers now represent the fastest‑growing slice of ad bookings.
The second is the Amazon Ads handshake, meaning a June integration lets marketers buy Amazon DSP impressions inside Roku’s inventory, marrying Roku’s audience graph with Amazon’s retail data. Analysts at KeyBanc say the tie‑up could lift fill rates and just raised their target to $115 on that thesis alone.
Those items rarely make retail headlines but they matter because they set a floor under future CPMs.
CPM Narrative Nobody’s Talking About
Streaming CPMs collapsed last year as every major service launched an ad tier. That glut is finally normalizing. CTV ad budgets are expected to jump 16.8% in 2025 to $33.5 billion even as linear spend falls, creating demand tailwinds.
Meanwhile, the ECI Media Inflation report pegs total media price inflation at +2.5% for 2025, down from +3.4% in 2024 but still positive, evidence that ad prices have at least stopped falling.
On Roku’s own platform, third‑party trackers show CTV CPMs ranging from $15 to $50, with premium FAST inventory at the high end. Roku even slashed rates below $10 early in the year to stimulate demand and successfully filled excess inventory. The spring scatter market now shows modest price upticks, hinting the inflection management predicted may already be underway.
Valuation Looks Broken
Even if you ignore DCF math and simply use price‑to‑sales, Roku appears discounted:
Wall Street Isn’t Paying Attention To This
One thing we can’t miss is Roku OS‑powered TVs now ship in dozens of countries, but only the U.S. and Canada contribute meaningfully to revenue per user. International ARPU is barely one‑sixth of North America’s, leaving a long runway once localized ad tech and payments flip on.
Furthermore, 2026 is a U.S. mid‑term election year; Roku management estimates political spending could add $150‑200 million of high‑margin revenue, none of which sits in current analyst models.
Roku doesn’t just sell third‑party inventory; it owns The Roku Channel, one of the top five ad‑supported streaming services in the U.S. According to eMarketer, more than 64% of OTT revenue growth now comes from advertising rather than subscriptions. Owning the supply as well as the demand‑side platform widens Roku’s take rate over time.
Don’t Kid Yourself About Risk
High beta cuts both ways. When Roku whiffed on Q4 2024 guidance, the stock dropped 17% overnight despite otherwise solid numbers. A sudden macro shock that crimps brand spending could easily chop another quarter of revenue out of the model. Hardware tariffs are a wildcard, too, though management says the impact should be minimal.
Competition is intensifying: Amazon owns the second‑largest share of the CTV device market, and Google’s Android TV is scaling fast in Europe. Yet Roku still holds 38% of U.S. CTV devices, more than double its nearest rival. That lead gives advertisers reach no other single platform can match.
Earnings-Triggered Pop
Because ad spend visibility is low, analysts tend to under‑model Roku’s ad momentum and over‑model its costs, setting the company up to beat estimates. In four of the last six quarters Roku delivered positive revenue surprises, three of those beats produced 20%‑plus next‑day moves.
With implied volatility pricing only a mid‑teens swing into the July 30 print, options markets may be underestimating the upside tail.
Is Roku Stock Undervalued Now?
The fair‑value gap of 49% DCF discount puts the price target at $174 and a near‑term catalyst is earnings where platform growth and EBITDA set up favorably.
Structural tailwinds, such as CTV budgets accelerating, CPM stabilization, Amazon Ads integration, political spend can be helpful.
The key risk is hyper‑sensitivity to macro ad cycles and a lumpy high‑beta stock history.
Put differently, Roku looks like a call option on the health of the ad market, but one you don’t have to exercise, you own the underlying business at a mid‑cycle multiple that already bakes in a recessionary ad climate.
Believe brand dollars will keep migrating from linear TV to streaming, and the current quote feels closer to the bargain bin than to a value trap.
That doesn’t make it a widows‑and‑orphans stock. Earnings‑day swings can bruise even seasoned traders, and a second leg down in ad CPMs would torpedo the bull case. Yet for investors comfortable with volatility, Roku’s blend of improving fundamentals, under‑appreciated growth levers, and a valuation still stuck in last year’s pessimism makes a compelling argument that the stock is, indeed, undervalued now.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.