We're streaming more than ever, but Roku (ROKU 0.32%) shareholders aren't relishing the revolution. The market share leader among stateside streaming platforms has been buffering as an investment. Roku stock is trading 73% lower in 2022, off a blistering 88% since peaking in the summer of last year. 

Will near-term challenges keep Roku in Wall Street's doghouse, or is this a golden opportunity to hop on a top dog in an emerging niche? Let's go over three things you should know before buying or selling shares of Roku. 

Someone channel surfing while curled up on the couch.

Image source: Getty Images.

1. Roku is still growing 

Eye the grim stock chart, and one would think that Roku is either losing its grip of the streaming market or the industry itself has stagnated. Neither theory holds up. Roku commands 30.5% of the global streaming market -- according to industry tracker Conviva -- with a thicker slice closer to home. Its closest rival, Amazon, holds just a 16% stake, and the gap has widened between the two over the past year. 

A record 65.4 million active accounts lean on Roku's operating system for their entertainment needs, a healthy 16% increase over the past year. They're streaming more per user than ever, as the 21.9 billion in streaming hours in its latest quarter has improved by 21% over the past year. Roku's platform is free to use, but it makes money by selling ads, striking revenue-sharing deals with apps on its hub, and collecting referral fees for getting its users to check out many its more than 5,000 apps. 

Roku is in a good place, as folks are spending an average of nearly four hours a day on smart TVs. Average revenue per user is up 10% to $44.25 on a trailing 12-month basis. 

2. The current quarter is going to be brutal 

Two things are keeping Roku stock down. A lack of profitability is a bad look for growth stocks these days, and Roku's red ink is at record levels. Roku rattled six consecutive quarters of profits, but that streak ended last year. The losses are coming, and the record deficit of $122.2 million it just posted for the third quarter is larger than any entire year in its history.

Guidance calls for the current quarter's net loss to more than double from the third quarter's hemorrhage, and that's the second thing holding Roku back. The advertising market has been taking a hit as the economy wobbles, and Roku isn't immune. Its guidance for the holiday quarter is problematic. 

The $800 million that it's targeting in net revenue for the quarter that ends later this month is an 8% decline over the prior year's showing. Growth may be slowing or even hitting a lull, but ad revenue per user is where the real pressure point is likely to be. Bulls will point out that Roku is conservative when it whips out its crystal ball. The 3% top-line increase it was modeling for the third quarter turned out to be a 12% gain. It's still going to be rough on both ends of the income statement. Its revenue channels are being upended, and it's coming at a lousy time when it's investing in everything from content to an uptick in hiring for an economy reopening play that isn't panning out as a Hollywood ending. 

3. The future is still bright

Looking out to 2023, Roku will naturally be susceptible to a widening recession, but it's well positioned in terms of usage. Just as we saw usage spike in 2020 when we had to stay home, a continuing slowdown would mean that we're streaming more on Roku because we'll be staying in more often to save money.

The surge in expenses at Roku is a weak fashion statement right now, but it is making shrewd moves for owning more of its content. The acquisition of the catalog of the failed Quibi gave it a lot of star-anchored content on the cheap. Even the head-turning Weird: The Al Yankovic Story was a cost-controlled passion project for Yankovic and Daniel Radcliffe that clocked in at a reasonable $12 million budget. Roku can and eventually will cut corners to become profitable again. There's just a growing audience to service at this stage of its growth cycle. 

Roku is losing money, but its cash-rich balance sheet is still in good shape. Let's also not forget that it's dominating a market where the country's four most valuable companies compete. With Roku stock near a historic low with its revenue multiple don't you think its rivals would want to acquire Roku at a respectable premium to become the new king of streaming video stocks? This year was rough, but there are a lot of ways 2023 can be a year the stock bounces back.