After its initial public offering in Sept. 2017, Roku (ROKU 2.55%) shares skyrocketed 1,940% to hit their all-time high in July 2021. The new streaming ecosystem was booming, riding the broad secular shift away from cable TV and toward internet-enabled video entertainment. But general macro weakness and decelerating growth have helped spur a stock decline of 89% since. 

After that dramatic fall, Roku's stock now sells at a compelling price-to-sales ratio of 2.3. But this cheap valuation doesn't immediately make the stock a no-brainer buy. In fact, shareholders might want to think about selling the business. Here are three reasons why this might be a good idea. 

1. Roku has been consistently unprofitable 

Looking back to 2015 and the earliest available data on the company's financials, Roku has been unprofitable in every single year except 2021, when the pandemic was still providing a demand boost to stay-at-home businesses. Considering the cumulative forecast net loss of about $506 million in 2022, Roku will be in the red again for that year. 

This lack of consistent and sustainable positive net income makes investors wonder when, if ever, Roku can start producing on the bottom line. Roku bulls could make a valid argument that because the business is in full-on expansion mode, investing in its hardware, ad platform, headcount, and marketing efforts, it's perfectly fine for it to forego net income in favor of top-line gains. It was certainly easy for management teams to sell Wall Street and the investing public on some grand plans of achieving profits at scale at some point far in the future. 

However, this type of behavior is no longer being rewarded. If there's one thing investors should have learned in 2022, it's to be more skeptical about companies that aren't generating profits.  

2. Roku is dealing with a softer digital ad market 

Roku has been dealing with a much softer digital advertising market starting in 2022. Top companies in the digital ad space, particularly Alphabet and Meta Platforms, experienced a surge in revenue growth in 2021 thanks to the pandemic's positive impacts and a strong economy. Roku dealt with a similar situation in its own operations. 

But last year, with its difficult year-over-year comparisons and more pessimistic economic outlook, the market for digital ads slowed dramatically. Roku's revenue through the first nine months of 2022 was 19% higher than for the same period in 2021, compared to a 55% gain in 2021, but is expected by the company to decline 8% in Q4. 

While corporate marketing teams continue to trim their ad budgets to conserve cash in the face of heightened economic uncertainty, and Roku's revenue prospects remain under pressure, it's likely that this is just a temporary event. Once the Federal Reserve stops or even reverses its path of interest rate hikes, leading to a more accommodative stance, the economy should be back on solid footing again. 

Even though this positive backdrop could be favorable for Roku's business over the long term, near-term conditions are still troubling. Investors who can't stomach the thought of things getting worse before they get better should consider selling the stock now. 

3. Roku lacks ecosystem control 

Another reason it might be a good idea to dump your Roku shares deals with something called ecosystem control, a concept I learned from hedge fund manager Dennis Hong. This means that a company has complete lock-in from key stakeholders, including suppliers, customers, employees, and other partners it interacts with. In other words, these stakeholders wouldn't even think of leaving or trying to alter the business's ecosystem because it provides so much benefit to them. 

I think Roku lacks this key attribute, and it could hurt the company. To be more specific, Roku doesn't have bargaining power when negotiating with some of the most powerful content companies. I also believe it's unlikely that the business will generate any ad revenue from Netflix's new lower-cost ad-based subscription offering, which is unfortunate given the massive membership base of 231 million the top streaming service has. Roku needs Netflix more than Netflix needs Roku, which lets Netflix call the shots in their dealings. 

Additionally, Roku doesn't share any revenue with Alphabet's YouTube service. There was a huge disagreement in late 2021 between Roku and YouTube about coming to terms on a partnership renewal. It was reported that YouTube was threatening to pull the service from Roku. Like Netflix, YouTube appears to have the upper hand here. If both Netflix and YouTube were pulled from Roku tomorrow, Roku's value proposition would quickly diminish.  

Although Roku's beaten-down stock looks like an absolute bargain right now, investors might want to consider selling shares.