Roku (ROKU -6.60%) stock was flying high in 2021, with its surging growth fueled by the accelerating adoption of streaming video services. However, as pandemic-related restrictions eased, viewers got up off the couch and got back to their lives, and Roku's growth subsequently slowed to a crawl, with year-over-year growth in both active accounts and streaming hours decelerating in each of the past four quarters.

In the wake of Netflix's (NFLX -1.51%) disappointing results last week, Roku stock slumped in sympathy, even though the pair have very different business models. Roku investors have been left wondering if the company is destined to suffer a similar fate when it reports its first-quarter results after the market closes on Thursday. 

Two people cuddling on the couch while watching television.

Image source: Getty Images.

Headwinds remain for Roku

There's simply no getting around the fact that Roku has a high bar to clear because of the pandemic-fueled results the company delivered early last year. In the 2021 first quarter, its revenue grew 79% year over year, driven by its platform segment, which soared 101%. Active accounts and streaming hours grew 35% and 49%, respectively, as consumers turned to in-home entertainment in the midst of a surge in coronavirus cases caused by the omicron variant. The company will have no such tailwinds this year, so it's understandable that investors are hesitant regarding Roku's current growth prospects.

There are other lingering questions. In the fourth quarter, Roku reported that the ongoing global supply chain disruption -- which has impacted the U.S. smart-TV market -- was weighing on its growth. This caused overall connected TV sales to fall below pre-pandemic levels, as sellers struggled to maintain supply.

It's always darkest before the dawn

Despite these challenges, Roku remained the No. 1 selling smart-TV operating system in the U.S. last year, included in more than 1-in-3 smart TVs sold in the country. Additionally, it was the top streaming platform in the U.S., Canada, and Mexico, with roughly 19.5 billion hours streamed in the fourth quarter. The company was also able to eke more money from each viewer, with its average revenue per user jumping 43%. This suggests that once account growth resumes, its profits could soar.

There are other reasons for optimism. Netflix recently announced plans for a lower-cost, ad-supported tier. Roku earns the lion's share of its revenue from digital advertising, which would certainly get a boost from Netflix ads. Additionally, the recent proliferation of newly minted ad-supported streaming services is a net positive for Roku, boosting its advertising revenue, as providers scramble to get their offering in front of Roku's 60 million active accounts.

Expectations are low

Management's outlook for the first quarter is likely conservative. The company is forecasting revenue of $720 million, which would represent growth of roughly 25% year over year, slightly above analysts' consensus estimates of $718.4 million.

Like many high-growth stocks, Roku shares have been punished in recent months, with the stock down a blistering 80% since it peaked last summer. Investors are clearly near peak pessimism for the streaming industry in general and Roku in particular, especially in the wake of Netflix's spectacular fall from grace.

Yet Roku stock is currently trading at just 53 times its trailing-12-month earnings, the lowest valuation in its history. This suggests that the selling may be overdone, giving Roku the potential for an earnings surprise when the company reports results on Thursday, April 28, after the market close.