Roku (NASDAQ:ROKU) made a lot of millionaires in its first four years as a public company. The maker of streaming devices and software went public at $14 on September 28, 2017 and soared 3,325% to its all-time high of $479.50 on July 26, 2021. A $30,000 investment in its IPO reportedly raised $1.03 million.

But today, Roku is only trading at around $64. That same investment would have been reduced to around $137,000 as the company disappointed its investors with slowing growth, a narrowing moat and continued losses. Rising interest rates have also weighed on its valuations.

Image source: Getty Images.

However, Roku’s 357% return since its IPO would still have beaten the S&P500by 129% during the same period. So, could Roku stock rally again and deliver millionaire gains with a new $30,000 investment today?

Why have the bulls lost interest in Roku?

Roku is the leading producer of streaming media devices in North America, but it faces stiff competition from Apple TV, AmazonSamsung Fire TV, Samsung Smart TVs and other similar devices. Roku is currently selling its hardware players at a loss to attach more viewers to its higher-margin platform business, which generates ad revenue through its display ads on Roku OS and ad-supported streaming videos.

Roku experienced a big growth spurt during the height of the pandemic as people stayed home, bought more streaming devices and consumed more streaming content. However, its growth slowed in 2022 and 2023 as these tailwinds dissipated, more competitors fragmented the market, and macroeconomic headwinds dampened consumer spending and pushed more companies to curb their digital advertising campaigns.

Roku’s number of active accounts and streaming hours have steadily increased since its IPO, but its average revenue per user (APRU) peaked in 2022 and fell in 2023. As a result, its total revenue growth has slowed down considerably over the past two years.

Data source: Roku. YOY = Year after year. TTM = last 12 months.

As Roku’s revenue growth slowed, it increased its investments in original Roku Channel content, new live sports contracts and loss-making smart TVs. This mix of slower sales and increasing expenses scared away many early investors from Roku.

Is Roku’s business finally stabilizing?

But in the first nine months of 2024, Roku’s active account count increased 13% year-over-year to 85.5 million, and total streaming hours increased 21% to 92, 9 billion. Its trailing 12-month ARPU remained steady at $41.10, but its total revenue still grew 16% year-over-year as its platforms and content segments devices were developing. It expects revenue to rise 16% for the full year — and that acceleration counters the bearish view that Roku is running out of steam.

From 2023 to 2026, analysts expect Roku’s revenue to grow at a compound annual growth rate (CAGR) of 14%. Its business is certainly maturing, but it is also cutting costs as revenue growth slows. This is how it retained its adjusted earnings before interest, taxes and depreciation (EBITDA) and trailing 12-month free cash flow (FCF) positive over the last five consecutive quarters.

Analysts expect Roku’s adjusted EBITDA to rise from just $4 million in 2023 to $448 million in 2026. With an enterprise value of $9.1 billion, Roku appears reasonably valued by compared to these expectations, i.e. 2 times next year’s sales and 31 times its adjusted EBITDA.

We have to take these estimates with a grain of salt, but they could be achievable if the company continues to dominate the free, ad-supported video streaming market, which Grand View Research predicts will grow 23% between 2024 and 2030.

But could Roku generate more earnings for millionaires?

If Roku matches Wall Street’s expectations through 2026, grows revenue at a consistent 14% CAGR over the next six years, and maintains the same forward valuations, its stock could potentially rebound about 150% to $160 ​​by the end of 2031. This would be a decent gain over seven years, but it would still be well below its all-time high. It also probably wouldn’t make his new investors millionaires unless they invested more than $400,000. Therefore, Roku won’t collapse anytime soon – but investors shouldn’t expect it to repeat its millionaire streak from 2017 to 2021.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Leo Sun holds positions at Amazon and Apple. The Motley Fool holds positions and recommends Amazon, Apple and Roku. The Motley Fool has a disclosure policy.