This stock dropped 40%

In partnership with

Arigato, dear investor,

Earlier this year, I had the incredible opportunity to attend the Berkshire Hathaway AGM in the USA to learn directly from Warren Buffett and other brilliant investors. It was a transformative experience! Even better, I stayed in an Airbnb with a group of my students, sharing knowledge, meals, and laughter—it was an unforgettable adventure.

But what truly surprised me during this trip was something unexpected. While settling into the Airbnb, I noticed that the remote control had a Roku button on it. It was the first time I encountered Roku in real life, even though I’d heard about the stock before. It was a powerful reminder of how valuable it is to explore businesses in the real world to deepen your understanding of their fundamentals.

What Does Roku Do?

Roku is a company that enables users to stream their favorite shows, movies, and apps directly on their TVs. They provide streaming devices, TVs with built-in Roku software, and even a platform for advertisers to reach their audience. Roku essentially makes money in two ways:

1. Hardware Sales: Selling devices like Roku streaming sticks and TVs.

2. Platform Revenue: This is the bigger driver of their business, which includes advertising, content distribution, and premium subscriptions.

Here’s where you can find out more about Roku.

2025 Prediction: A Surge of Self-Serve CTV Buyers

Roku predicts that 2025 will be a breakthrough year for self-serve CTV advertising. Roku Ads Manager makes it easy to integrate CTV into your 2025 marketing mix. Easily segment your target audience, optimize campaigns in real-time, and drive conversions with interactive ad formats and shoppable ads with a Shopify integration. Roku Ads Manager makes CTV advertising accessible and impactful for businesses of any size.

Discover CTV performance on Roku

How Has Roku Performed?

In recent years, Roku has seen rapid revenue growth due to the rise of streaming. However, like many tech companies, its earnings and cash flow have faced challenges:

• Revenue: Roku’s revenue has grown significantly, particularly its platform revenue, as advertisers shifted their budgets to streaming.

• Earnings: Despite revenue growth, Roku has struggled to turn a consistent profit, partly due to rising competition and increased spending.

• Cash Flow: While Roku has positive cash flow in certain quarters, it remains under pressure to control costs while scaling its platform business.

Although the company is generating more revenue, its business model does not appear to be fundamentally sound. This weakness is also reflected in its stock performance, with the price dropping by over 40% in the past five years.

Roku's journey is a reminder that even fast-growing companies face hurdles in profitability and sustainability. It’s essential to dig deeper into such businesses before investing.

Why Real-Life Experience Matters

This unexpected encounter with Roku made me reflect on how important it is to explore businesses not just through financial reports but in everyday life. Seeing a company’s product being used or understanding its customer experience can give you a better perspective on its value and potential.

Next year, I’m thrilled to bring another group of students to the Berkshire Hathaway AGM. We’re even planning a visit to an Amazon Fulfillment Center! Can you imagine seeing the inner workings of one of the world’s largest e-commerce businesses? I’m confident it will deepen our understanding of the retail and logistics industries.

If you’ve ever had a real-world encounter with a business you’ve invested in—or are considering investing in—I’d love to hear about it. Reply to this email and share your story!

Let’s keep exploring, learning, and growing together. 😃 

Arigato!

Chloe
Arigato Investor