Chances are either you or someone you know is streaming video content from a device made by Roku (ROKU -0.80%). When the company reported third-quarter 2019 earnings in November, it revealed that it now has over 32 million active users -- up 36% year over year.

And if you were able to stream the Kansas City Chiefs Super Bowl victory with Roku, you can thank a renewed distribution deal with Fox Corporation at the last minute. That's good news for Roku shareholders, since the company recognizes it needs to maintain good relationships with content publishers like Fox if it's going to be successful in the long term.

A couple sits and watches TV.

Image source: Getty Images.

Speaking of the long term, do you wonder how longtime shareholders of Roku are doing? The general public couldn't invest in Roku until Sept. 28th, 2017, the day it priced its initial public offering (IPO). What if someone had invested $5,000 in Roku stock that day?

How much?

Shares of Roku priced at $14, but they opened at $15.78 on the first day of trading. If you had invested right at that moment, you'd own 316 shares. Now, not even three years later, Roku's price per share has risen to around $131 as of this writing. That means those 316 shares are now worth over $41,000.

It's one thing to sit here and be jealous of the returns those early investors have enjoyed, but those who bought on day one and held until now have nerves of steel. Roku's rapid rise hasn't been straight up and to the right. The stock has had several pronounced drops over multi-month periods.

ROKU Chart

Data by YCharts

In the first few months of 2018, Roku was in the middle of a transformation from being reliant on hardware revenue to generating more platform revenue. That uncertainty was a reason the stock fell 35%. Shares would subsequently recover and even gain ground before again encountering a decline of over 60% in late 2018. This volatility was due in part to a trade war with China that was just starting to heat up, affecting some of Roku's top TV manufacturing partners. And then, in September 2019 alone, the stock lost another 40% as investors took in news of an evolving streaming landscape and analyst downgrades. 

That's a wild ride already, but those were just some of the big drops. There were plenty of smaller hiccups along the way.

Those nerves-of-steel investors had to look past these short-term issues and focus on the big picture. The first thing they probably focused on was the major shift happening in consumer habits -- the phenomenon known as "cord-cutting." According to Leichtman Research Group, the major pay-TV companies lost 1.7 million subscribers in the third quarter of 2019 alone.

Simply put, the shift toward streaming has been happening for a while now, and it's accelerating. That puts millions of advertising revenue on dying traditional TV platforms, and over time, that ad revenue is moving to where the eyeballs actually are. This puts Roku dead center in a massive market opportunity --  understanding this undoubtedly helped Roku investors stomach the ups and downs.

But shareholders also needed to place a little faith in the company. Consider that at the end of 2016, 75% of revenue came from its player segment -- the Roku hardware. Growth in the player segment slowed substantially and even turned negative some quarters. Over the last twelve months, the player segment only accounted for 36% of the top line, as it has been replaced by the far more profitable platform business.

It doesn't take an expert to understand that focusing on a more profitable business segment is the right move. In the third quarter of 2019, gross margin for the platform segment was 62.6% compared to just 7.6% for the player segment. But there's uncertainty when a company diverts attention from its primary revenue source, so shareholders certainly took a calculated risk by holding on through this transition.

What's next?

Already an eight-bagger, there are concerns that Roku stock has gotten ahead of itself. The company trades at over 15 times sales and still isn't profitable. This lofty valuation after a stellar two-year run will keep many skeptics on the sidelines.

That said, Roku is still in high-growth mode. As previously mentioned, active users are up 36%, and revenue is growing even faster -- up 50% year over year. The bulk of this revenue comes from North America, but in 2020, Roku is pursuing more growth overseas. Untapped international markets and accelerated cord-cutting in the U.S. are both signs that there's still upside for Roku and its shareholders.