It's been a challenging year for streaming giant Roku (ROKU 1.49%). The company is struggling amid macroeconomic challenges, its financial results have been subpar, and investors have sold off the stock, which is down by a whopping 75% year to date. What's more, the markets are still dealing with inflation, and some experts have predicted that a recession could be on its way within a year.

How will Roku respond to these headwinds in the coming few quarters? Let's dig in and find out where the company could find itself by this time next year. 

A grim outlook 

Roku makes much of its revenue from its advertising business. But many companies have decreased their ad budgets. With rampant inflation and lower consumer spending on many goods and services, that's not surprising. Roku is still growing its advertising-related top line, which it records in its platform segment. During the third quarter, the tech company's platform revenue increased by 15% year over year to $670.4 million.

But sales growth for this segment -- which makes up the lion's shares of Roku's total revenue -- has slowed considerably, leading to lower top-line growth overall. 

ROKU Revenue (Quarterly YoY Growth) Chart

ROKU Revenue (Quarterly YoY Growth) data by YCharts

Roku expects the slowdown in the advertising industry to continue into next year. It's hard to predict when this market will rebound. It could last even longer than a year if the prophecies of doom come to pass and we officially enter a recession. On the other hand, Roku's player revenue -- generated through the sale of its namesake streaming devices -- is declining.

The company is absorbing the higher costs of getting these products to market and shielding consumers from price hikes. These higher costs, coupled with slower revenue growth, are seriously affecting the bottom line. In the third quarter, the company reported a net loss per share of $0.88, substantially worse than the earnings per share of $0.48 reported during the year-ago period.

Roku expects fourth-quarter revenue in both of its segments to be lower than the previous year. On the bright side, the company is implementing measures to decrease expenses. It recently announced it would lay off 200 employees in the U.S., reducing its workforce-related costs by about 5%. While not a bad way to save money, Roku will keep struggling as long as the economy is down -- which could last well into next year and beyond.

Investors should expect even more difficult times ahead for the company in the coming quarters. 

Here's the good news 

Although Roku is facing challenges, it is also seeing some positive. First, its active accounts continue to increase, jumping by 16% year over year to 65.4 million in the third quarter. Choosing to shield customers from price increases for its streaming device has its advantages. It helps Roku get more people into its ecosystem, which can help the company attract even more ad business once the economy recovers.

Second, consumers are increasingly moving away from linear television and into streaming. In September, streaming accounted for 36.9% of television viewing time compared to just 27.7% a year earlier, according to the analytics firm Nielsen. But businesses have been slow to follow the trend with their advertising strategies, as Roku reported earlier this year:

In the first half of this year, TV streaming passed the tipping point, where reach and engagement for adults aged 18 to 49 exceeded that of legacy pay TV. However, marketers are expected to spend just 22% of their TV ad budget on streaming in 2022. The ultimate driver of our success is the continued shift of viewers to streaming around the world, and the closing gap between viewership and ad budgets.

Closing this gap may take some time as legacy pay television, while on the decline, is far from dead, especially in other regions where the streaming industry has penetrated less than it has in the U.S. In other words, there is still a vast opportunity for Roku, one which the current economic slowdown won't fundamentally change.

Though I expect Roku to continue struggling for the next year -- and perhaps longer than that -- I still view the company's shares as a buy because of the long-term still ahead of it. Plus, Roku's price-to-sales of 2.5 is substantially lower than it was in early 2021 and looks reasonable compared to the S&P 500's multiple of 2.3.

For investors looking beyond the next 12 months, Roku's shares are a steal at these levels.