After falling precipitously from highs set in mid-2021 over slowing revenue growth and hitting new lows by late 2022, Roku (ROKU 0.06%) stock is up 52% so far in 2023. Roku's 2022 performance shows it is clearly not immune from the macroeconomic headwinds, but as a leading brand in TV streaming, it's not going anywhere.

Let's take a closer look at two factors that are telling smart investors it's time to buy.

1. A weak ad market doesn't impact Roku's long-term value

The reason Roku stock tumbled is the reason the stock will rebound. Roku generates revenue primarily through advertising. This is a cyclical market that comes and goes with the economy. As businesses pulled back on spending last year, Roku's revenue growth came to a halt.  

ROKU Revenue (Quarterly) Chart

ROKU Revenue (Quarterly) data by YCharts

When the advertising market was strong, Roku was growing revenue at much higher rates. In the fourth quarter of 2021, revenue grew 33% year over year. The stock traded at a high multiple of annual sales, as investors looked ahead to many years of growth from TV advertisers shifting to digital media platforms.

ROKU PS Ratio Chart

ROKU PS Ratio data by YCharts

At the end of 2021, investors were valuing Roku's business at over 10 times its annual revenue. It now trades at a fraction of that multiple. That is only a small premium to the average company in the S&P 500 index, which seems a bit low, given how fast Roku is capable of growing. 

We've seen this before. In the 1970s, legendary investor Warren Buffett scooped up leading media, newspapers, and advertising stocks on the cheap when high inflation was hurting the economy and sending valuations to deeply discounted levels. 

The only question smart investors need to ask is: Does Roku still have the competitive position in streaming to generate growth?

2. Roku's brand is still No. 1

There are a few signs that Roku's brand is stronger than ever. Even during a year when ad spending was slowing down, Roku was still signing up more households at a good clip. It ended 2022 with 70 million active accounts, up nearly 10 million over 2021. 

It seems Roku's offering of free ad-supported content and affordably priced TV models are winning over new customers when the prices of everything else are going up. On that note, Roku recently came out on top in Morning Consult's Fastest-Growing Brand Among Gen-Z Adults.  

Roku designs its operating system specifically for TVs, which allows it to offer a superior user experience over competing platforms from Samsung and LG. The personalization features, content discovery, and premium content on The Roku Channel help the company gain valuable share in a tough economy. Roku was the top-selling TV operating system in the U.S. in the fourth quarter, making up 38% of units sold. 

Investors don't have to make guesses about whether the stock will eventually bounce back. Roku's growth in active accounts will be valuable to advertisers once the ad market recovers, and that could make the stock a bargain at these lower price levels.

Stocks can move unpredictably in the near term, as 2022 reminded us, but stocks follow business fundamentals over the long term. That's why investors interested in Roku should consider getting in on the stock while it's down.