1 Growth stock down 29% only worth buying now

If you're a growth investor, you're probably struggling to find compelling deals in this market.S&P 500 The index has risen 10% year-to-date to 2024 after last year's surge, and this rise is more pronounced in the high-growth tech sector.

Many of the stocks that were hit hard in 2022 have rebounded as Wall Street's view of the economic outlook and interest rate trends has improved. However, many of the stocks that were hit hard in 2022 have rebounded.Roku (NASDAQ resonance code: ROKU)But it's excluded from the complex. The streaming media stock is down nearly 30% so far this year.

Don't let the downturn scare you away from this tempting business. Unfortunately, Roku hasn'tNetflix (NASDAQ: NFLX)That maturity, the latter is now generating ample cash flow and excellent profits. By contrast, Roku recently announced that it will post a net loss for the second consecutive year in 2023.

However, investors should still consider holding on to Roku stock after its recent correction. Here's why

Powerful and Sexy

Roku has a unique operating model and its monetization power is still being built. The main challenge is that most of the company's earnings come from ad spending, whereas Netflix andDisney+ Streaming media competitors such as YouTube are more focused on paid subscriptions.

The former has not been able to turn a profit lately, as digital ad prices have slumped for much of the last year. Roku, however, hasn't had trouble keeping up, with streaming hours up 20% in 2023, topping 100 billion hours. The company added 10 million active users last year and now has 80 million accounts (compared to Netflix's 260 million).

Last year, it wasn't easy to monetize an ever-expanding subscriber base, but it's likely to be a temporary challenge. Look beyond that and you'll find plenty of room for growth, as more and more TV viewers switch from traditional broadcast to streaming. Roku, for example, averaged 4.1 hours of streaming time per day last year, up from 3.8 hours in 2022. But the average daily broadcast time in traditional broadcasting is nearly 8 hours.

Growth over profit

Roku has decided to prioritize growth over short-term profits, and Wall Street is disappointed to see that the streaming media company can't now achieve both goals at the same time. Operating losses widened from $530 million in 2022 to a heartbreaking $800 million last year. That's probably enough to keep many investors away from this growth stock.

However, you will see encouraging signs of an earnings rebound through the profitability metrics. Last year, Roku returned to positive free cash flow, Koon expects adjusted earnings to be positive in 2024, and the company will work hard to achieve positive GAAP results over the next few years." In a recent shareholder letter, the company's Koon said, "We plan to increase our revenue and free cash flow to progressively achieve profitability.

Looking Ahead

Prudent investors may want to wait for signs of tangible progress on the profit side before purchasing the company's stock. Most Wall Street professionals believe that the next few quarters are likely to be volatile, with sales expected to grow by about 121 TP3T. If you believe that Roku will find a way to monetize its growing user base, buying the stock at a time of heightened pessimism could pay off handsomely.

Compared to Netflix's price-to-sales (P/S)8 ratio, Roku's stock price is less than three times sales. But if Roku can find a way to capitalize on its growing audience base, patient investors should be happy to see this story unfold.

Should you invest $1,000 in a Roku now?

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Demitri Kalogeropoulos owns shares of Netflix and Walt Disney.The Motley Fool holds recommendations for Netflix, Roku and Walt Disney.The Motley Fool has a disclosure policy.

1 Growth Stocks Worth Buying Now That Only Fall 29% was originally published by The Motley Fool