You'd be tempted to think that there was something terribly wrong at Roku (NASDAQ:ROKU) if you looked solely at the stock price. The streaming platform and pioneer is down 14% year to date, which doesn't compare favorably to the 1% gain managed by the S&P 500.

Taken in a vacuum, the share-price decline doesn't appear to bode well for Roku. But you might be surprised to learn that just six weeks ago, Roku was hitting all-time highs, up nearly 48% year to date, compared to the broader market's gain of just a few points. What caused the 62% drop from the company's recent lofty heights, and what should investors expect from Roku from here?

An internet-enabled TV displaying the Roku channel with a number of programs to view.

Image source: Roku.

Solid results, but Wall Street wanted more

Roku's third-quarter results were impressive -- and they're representative of the growth the company has achieved so far this year. Roku reported revenue of $173.4 million, up 39% year over year, topping both the high end of management's guidance and analysts' consensus estimate. The company also reported a net loss of $11.7 million, which was better than a $15.5 million loss Roku forecast at the midpoint of its guidance. That resulted in a diluted loss of $0.09 per share, a significant improvement from the loss of $8.79 the company delivered in the prior-year quarter.

The stock had already taken a beating during the recent market declines that were particularly rough on tech stocks. Roku's shares fell an additional 22% on the heels of its financial release. With a seemingly solid earnings report, what caused the plummet? Wall Street was less than happy with Roku's forecast for the coming quarter. The company guided for a net loss of about $1 million, when analysts were looking for net income of $7 million.

Better days ahead

While Wall Street may be myopic in its view, there are plenty of reasons to believe that Roku has a bright future ahead. While the company was initially known for its internet-enabled streaming devices, advertising on Roku's platform segment became the primary breadwinner earlier this year, surpassing sales in its player segment. High-margin platform revenue -- with a gross profit margin above 70% -- grew 74% year over year, and accounted for 58% of total revenue in the most recent quarter.

Yet even as the company works to grow its platform business, its digital players continue to command an impressive slice of the market. The company developed an operating system designed specifically for streaming television, and as a result, currently 1 in 4 smart TVs sold in the U.S. are Roku TVs.

Users continue to flock to the service: Active accounts grew to 23.8 million, up 40% year over year. Streaming hours also soared, growing to 6.2 billion, up 63% compared to the prior-year quarter. Subscribers are spending more as well, as average revenue per user (ARPU) increased to $17.34, up 37% year over year on a trailing-12-month basis.

Couple sitting on couch eating popcorn and watching TV on laptop.

Image source: Getty Images.

Larger societal trends

As more and more people abandon cable and adopt streaming, more advertising will move from traditional television to streaming as well. This puts Roku in a unique position to capitalize on the trend, as its platform is open to all comers, and it's not limited to certain providers.

Additionally, the recent move to offer up the Roku channel to all web-enabled devices will significantly expand the company's reach to a wider audience, allowing Roku to collect more valuable user data. This will provide the company with much better information as it makes decisions about providers and content licensing.

It all adds up

While Roku stock is down so far this year, investors shouldn't mistake a falling price with a floundering business. The company continues to leverage its strengths and position itself for the long term. In the future, shareholders will likely look back on the recent price decline and see it as nothing more than speed bump.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.