What happened

Shares of streaming company Roku (ROKU -6.60%) fell 10% in March, according to data provided by S&P Global Market Intelligence. The company is still reeling from its fourth-quarter results announced in February and negative sentiment related to its future potential.

So what

Roku was one of the hottest stocks at the beginning of the pandemic. Its popular streaming devices and free streaming channel exploded when people stayed home, and trends indicated that this is a real shift in consumer viewing behavior.

People sitting on a couch looking at something.

Image source: Getty Images.

While that remains true, the company's growth has greatly decelerated during the past few quarters, and that has affected profitability. Investors are now questioning whether or not Roku has the immense potential they'd originally thought.

For the full year 2022, revenue increased 55%, which is a slowdown, but it's still robust growth. Fourth-quarter revenue increased 33%, but player revenue, which has been challenged due to the supply chain and people returning to away-from-home entertainment, decreased 9%. Net income decreased from $67 million last year to $24 million this year.

Some other positive updates were a 15% year-over-year increase in streaming hours, which also increased over the third quarter, and an impressive 43% increase in average revenue per user to $41.

Despite the report still demonstrating sustained growth, Roku stock has tanked. Investors don't feel the high premium on the stock is justified at these growth levels.

Now what

There's still plenty of reason to believe that Roku has strong growth prospects ahead. The shift away from traditional TV is still ongoing, and streaming still represents a small slice of overall viewing hours. Roku is forging advantageous partnerships and increasing revenue and viewer engagement. Just today, management announced that it has extended its distribution partnership with Amazon in a "multi-year" agreement, and Roku stock popped on the news.

The stock has also plummeted to a point where it looks like an attractive buy. It's down 60% over the past year, and shares are trading at 80 times trailing-12-month earnings, a huge drop from the 540 times earnings it was trading at last year at this time. The Wall Street average consensus is a 34% price target with a high of 154%. There's still risk here, and the price is still not cheap. But investors who can handle it should definitely consider putting Roku shares on their shopping lists. The long-term outlook looks very compelling.