IN BRIEF
| Subject | Details |
| Pandemic Growth | Roku And Shopify have seen major growth during the pandemic with the increase in video streaming and online shopping. |
| Current Challenges | Both companies have seen their valuations fall significantly following inflation, rising interest rates and reduced consumer spending. |
| Roku Status | Roku is benefiting from continued growth in streaming households, but faces stiff competition with negative margins on its devices. |
| Shopify Status | Shopify is diversifying its services with new tools and returning to profitability, less direct competition, with a more reasonable current valuation than at its all-time high. |
| Recommendation | Shopify is considered a better buy than Roku due to its rapid growth, stable profits, and less competition. |
In a changing investing world, choosing between Roku and Shopify can seem complex. Both of these stocks saw tremendous growth during the pandemic, but then faced economic challenges. This article explores Roku and Shopify’s recent developments, their financial performance, as well as their future prospects, to determine which one might be a better choice for investors right now.
Roku Evolution and Challenges
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During the pandemic in 2020 and 2021, Roku has seen a rise thanks to the dramatic increase in home streaming. However, once these tailwinds dissipated, Roku encountered obstacles. Inflation and rising interest rates have put pressure on consumption and reduced company valuations. Today, Roku is trading about 84% below its all-time highs.
Roku’s strategy to maintain its position
Roku makes most of its gross profits from its software platform, primarily through in-app ads and the ad-supported Roku Channel. Despite compromised profitability in 2022, the number of households connected to Roku and streaming hours continued to increase. This growth indicates strong retention, and the potential to capitalize on the growing ad-supported streaming video market remains promising.
Growth prospects for Roku
Through 2026, analysts project Roku’s revenue to grow at a compound annual rate (CAGR) of 13%. Despite increased competition from tech players like Amazon, Apple, and Google, Roku’s ecosystem appears resilient. With an enterprise value of around $8 billion, Roku appears reasonably valued for less than twice next year’s projected sales.
The bright future of Shopify
The pandemic has also favored Shopify, which has capitalized on the boom in online commerce. Shopify has solidified its place by offering standalone e-commerce tools that simplify the creation of online stores. However, once health restrictions were lifted, its growth slowed down. Currently, Shopify stock is trading 52% below its record highs, but its potential to return to profitability still attracts investors.
Shopify and continuous innovation to stand out
As its revenue continues to grow, Shopify has repositioned itself with artificial intelligence tools, the expansion of its Shop Pay payments platform, and the introduction of point-of-sale hardware solutions. The integration with Amazon to enable purchases via “Buy with Prime” buttons also strengthens its appeal to small businesses wanting a diverse distribution network.
Projections for Shopify
Shopify’s growth outlook is ambitious: 22% revenue CAGR and 141% GAAP earnings per share growth through 2026. With an enterprise value exceeding $98 billion, Shopify may seem expensive at nine times next year’s projected sales, but offers potentially more stable growth than Roku.
Choosing between Roku and Shopify
Despite a higher valuation, Shopify stands out with faster growth, stable profitability and less direct competition, making it an attractive candidate for investors. Roku, while showing signs of recovery, faces an uncertain future as the streaming video market continues to evolve.
| Criteria | Roku | Shopify |
| Revenue growth 2023 | 11% | 26% |
| Main source of income | Advertising on the OS platform | E-commerce tools for SMEs |
| Major competitors | Amazon, Apple, Google | Amazon |
| Market development | Fragile in the face of tech giants | Expansion with AI and POS payments |
| Current company rating | $8 billion | $98 billion |
| Expected long-term return | 13% CAGR until 2026 | 22% CAGR until 2026 |
| GAAP Profitability | Negative in 2023 | Positive after logistics transfer |
| Risk premium | Strong due to uncertainties in the video market | Less thanks to e-commerce diversification |
| Expansion potential | Depends on the streaming advertising market | Leverages the Amazon network |
- Post-pandemic growth
- Roku: Growth of 58% in 2020 and 55% in 2021
- Shopify: Growth of 86% in 2020 and 57% in 2021
- Roku: Growth of 58% in 2020 and 55% in 2021
- Shopify: Growth of 86% in 2020 and 57% in 2021
- Recent evolution of turnover
- Roku: Increase of 13% in 2022 and 11% in 2023
- Shopify: Increase of 21% in 2022 and 26% in 2023
- Roku: Increase of 13% in 2022 and 11% in 2023
- Shopify: Increase of 21% in 2022 and 26% in 2023
- Profitability
- Roku: Net loss widened in 2023
- Shopify: Return to profitability after divestment
- Roku: Net loss widened in 2023
- Shopify: Return to profitability after divestment
- Future Growth Opportunities
- Roku: Advertising-supported streaming video market
- Shopify: Development of generative AI and integration with Amazon
- Roku: Advertising-supported streaming video market
- Shopify: Development of generative AI and integration with Amazon
- Financial assessment
- Roku: Reasonable valuation at almost 2 times projected sales
- Shopify: 9 times projected sales, more stable than in 2021
- Roku: Reasonable valuation at almost 2 times projected sales
- Shopify: 9 times projected sales, more stable than in 2021
- Roku: Growth of 58% in 2020 and 55% in 2021
- Shopify: Growth of 86% in 2020 and 57% in 2021
- Roku: Increase of 13% in 2022 and 11% in 2023
- Shopify: Increase of 21% in 2022 and 26% in 2023
- Roku: Net loss widened in 2023
- Shopify: Return to profitability after divestment
- Roku: Advertising-supported streaming video market
- Shopify: Development of generative AI and integration with Amazon
- Roku: Reasonable valuation at almost 2 times projected sales
- Shopify: 9 times projected sales, more stable than in 2021