Hunting for stocks that are poised to skyrocket in 2022? You've come to the right place. In this segment of Backstage Pass, recorded on Dec. 22, Fool contributor Danny Vena shares with fellow Fool contributor Rachel Warren one of the top stocks that he thinks is poised for a bull run in the new year.
Rachel Warren: What about you, Danny? What was your company that you chose?
Danny Vena: It's interesting that you said that, because the company that I'm going to talk about is one whose business is doing quite well as well, and that is Roku (ROKU +0.83%). I've gone straight to Roku's most recent quarterly shareholder letter, and the table on the first page there to talk about what it is that I think investors have wrong.
If you look at their total net revenue, and I'm going to blow this up just a little bit here so folks can see better. But if you look at their total net revenue, up 51% year over year; their average revenue per user up here toward the top, up 49%.
Their platform revenue, that includes the Roku channel, the company's digital advertising, which produces the lion's share of the company's both revenue and profits, and also the licensing that it does of its smart television operating system. That revenue on the platform is up 82% year over year. There's a lot going right for the company.
Now, there's two things that investors have focused on in selling the shares off, and Roku stock is down about half of what it was just several months ago. If you look at their active accounts, active account growth grew just 23% year over year, and streaming hours grew 21% year over year.
Now, people don't seem to understand that first of all, we're comparing this quarter to a quarter when everyone was on lockdown, and people were joining hand over fist to the current third quarter, when this was really the first summer vacation since the pandemic when people got out with their families and got to go do things, went on vacations, went outdoors, put down the remote, and went and did things.
To me, seeing the active account growth slow and the streaming hours slow made perfect sense. But investors took that as a red flag and a sign of impending doom, which I think is a mistake.
The second issue, and they brought this up on the conference call, saying that there was a little bit of problem with supply chain logistics, which we've been seeing everywhere, and as a result, they weren't going to be able to have as many of the set-top boxes and dongles available for sale as they would have liked.
That's not really a problem. They sell those pretty much at cost, and the purpose of those is to expand the ecosystem and get viewers into the Roku platform so that they can sell digital advertising. That's the big misunderstanding that investors have. I think, at a 50% discount, investors should really take a second look at Roku.
Warren: Thank you so much for breaking that down. That's incredibly helpful, I think especially to members like myself. I don't follow this stock particularly closely, although we have been talking about it more over recent shows. I think that those are important points to remember. The business is still looking really strong, but it would make sense to be seeing a level of growth that perhaps is not on par with what it was when everyone was stuck inside their homes, so very interesting.
