Roku's (ROKU 0.15%) first-quarter results (ending March 31, 2023) have been a mixed bag. While the company managed to surpass consensus revenues and earnings estimates, the effect of the cyclical slowdown in the advertising technology industry was all too apparent. Revenues grew by a paltry 1% year over year to $741 million, while adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) deteriorated from a profit of $57.6 million to a loss of $69.1 million in the same time frame.

Despite the macro headwinds, Roku's long-term fundamentals remain strong. Read on to find out why Roku may be a super-smart pick for patient investors in May 2023.

Roku has multiple monetization opportunities

The rapid expansion in the number of streaming content services has made cross-service discovery a major challenge for the industry and subscribers. As a leading operating system for smart TVs and streaming devices and a major streaming service aggregator in the U.S., Roku has been making content visible to new and existing subscribers through services such as Roku Search, the free ad-supported Roku Channel, and the company's short-form promotional content section called "The Buzz."

Roku has partnered with a range of content providers (subscription video-on-demand and ad-supported video-on-demand) and also integrates some of the content on its Roku Channel. The company earns revenues from multiple avenues, such as selling ad inventory from content publishers to advertisers, displaying and selling ads for the Roku Channel, and selling subscriptions to third-party streaming services on the Roku platform. The company also provides audience data to publishers for targeted advertising and is well-positioned to reap the financial rewards in the ever-expanding connected television (CTV) advertising market.

Impressive engagement metrics

Roku has been a major beneficiary of the increasing shift of audience attention from linear television to streaming content. Hence, even during the current precarious macroeconomic environment, the company has managed to increase its active user base. Roku ended the first quarter with 71.6 million active users, up 17% on a year-over-year basis.

Roku also clocked in 25.1 billion streaming hours, up 20% on a year-over-year basis. While monetization of these hours seems to have suffered (average revenue per user down by 5% year over year in the first quarter), this challenge may resolve as the advertising industry recovers.

Growth potential in international markets

Roku's services are currently used by nearly half of the broadband households in the U.S. for watching television. In December 2022, digital streaming accounted for 38.1% of total television and video usage in the U.S. Hence, there is plenty of room for further growth in the company's core U.S. market.

Roku is also seeing robust growth prospects in international markets such as Canada, Mexico, and the U.K. The company aims to replicate its U.S. market strategy in international markets -- grow an active user base, improve engagement, and then monetize these accounts. Roku is currently in the "grow active accounts phase" in several international markets, but has reached the "monetization phase" in a few markets, including Mexico and Canada.

Dirt cheap valuation

Roku is currently trading at a historically low level of 2.5 times sales. Additionally, while the stock price has appreciated by roughly 35% so far this year, it is still trading roughly 30% lower on a year-over-year basis.

Although the slowdown in the advertising industry and its effect on the company's top-line and bottom-line performance cannot be ignored, this valuation does not reflect Roku's growth prospects when the ad market recovers.

There is no question that Roku seems to be a risky stock now, considering the possibility of a recession and the continued downturn in ad spending. However, sooner or later, every economic slowdown will come to an end. Hence, with several growth drivers and a super-cheap valuation, this may just be the right time for patient investors to pile on this stock.