The market is giving Roku (ROKU 1.91%) the cold shoulder nowadays. After retreating to share prices not seen since July 2020, the stock is trading 73% below last summer's all-time highs.
Bearish investors believe that Roku's booming business in the COVID-19 era is a temporary and artificial surge. The gains are sure to turn into a bust when the coronavirus crisis is behind us. That's the reasoning behind Roku's sagging stock chart.
Roku's plunging share price
At the same time, Roku's business continues to thrive. As a leader in media-streaming platform technologies, the company has seen sales and free cash flows skyrocket in recent years -- and the rush started before the global health crisis arrived. In my eyes, the arrival of Walt Disney's (DIS -0.45%) Disney+ service is the most meaningful catalyst behind the digital streaming industry's golden age. That game-changing event took place in November 2019 -- just before the coronavirus was discovered.
As an independent supplier of the hardware and software that connects consumers to streaming media services, the company benefits from the growth of the sector as a whole. So when Disney kicked off the industrywide chase to grab subscribers for newly launched streaming options, Roku investors didn't care whether the House of Mouse posed a threat to streaming veteran Netflix.
Image source: Getty Images.
The influx of many new video-streaming options spelled good news for Roku no matter how the surging sector shapes up in the long run. Every new service needed to be compatible with the leading platform. That's why Roku's early lead quickly ramped up into an unbeatable business advantage.
Roku's fantastic results
The surging top-line sales in 2020 and 2021 generated a solid stream of free cash flows, which the company is investing in additional growth engines for the future:
ROKU Revenue (TTM) data by YCharts
Roku is only getting started on a growth story for the ages. The installed user base is growing by leaps and bounds, while the company also expands its profit margins and builds a robust cash machine. At the same time, you can buy the stock at roughly one-quarter of last summer's prices. That's a no-brainer deal in my book.
