What happened

Shares of TV streaming platform Roku (NASDAQ:ROKU) cratered 8.8% today, building on the stock's negative 37% return so far in 2021 with just a month left until the new year. Roku is now more than 50% off its all-time high it last reached over the summer.

A sky-high valuation has drawn plenty of criticism, and even after the steep declines, shares still trade for 11 times trailing-12-month sales and 108 times trailing-12-month free cash flow.  

Someone sitting on a couch in front of a TV.

Image source: Getty Images.

So what

The recent sell-off in Roku comes as investor worry grows over the omicron variant of the coronavirus arriving in the U.S. Interestingly, past pandemic news and possible economic lockdowns were viewed as positives for Roku since more time spent at home would inevitably lead to more time in front of a Roku-powered television. 

Stock price and pandemic aside, though, Roku is doing more than just fine. During the third quarter of 2021, active accounts grew 23% year over year to 56.4 million, and average revenue per user over the last 12 months was up 49% to $40.10. This builds on the massive boom the company reported this same period a year ago (revenue growth of 73% in Q3 2020), when early pandemic lockdowns sent Roku into the stratosphere.

Now what

Roku's streaming platform holds a handy lead in the TV streaming device and smart TV market in the U.S. And with online TV content distribution and advertising expected to continue growing at a rapid pace for the foreseeable future, Roku the business is in a great place right now. 

Of course, the stock has been a totally different story this year, but such is life for investors in high-growth businesses. Though valuation remains high, Roku is beginning to turn a corner on profitability and is poised to start generating robust returns in the coming years. If you were thinking you missed the boat on this stock during the pandemic-fueled explosion higher, now could be the second-chance buying opportunity you were waiting for.

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.