Can these broken stocks soar more than the “Magnificent Seven” over the next five years?

The “Magnificent Seven” stocks are the cornerstones of today’s technology markets. These stocks include: Amazon, alphabet, apologize, meta platform, microsoft, nvidiaand teslaCollectively, they have gained thousands of percent in value over the years as they have built their businesses and fueled the global economy.

Are the good days over? Almost certainly not. But there are other companies that may offer a bigger opportunity right now. Consider a Streaming Company year (year -1.04%). Roku stock is still down more than 80% from its peak and is down nearly 30% this year.

Can Roku soar and surpass the Magnificent Seven over the next five years? Let’s dive in.

Is streaming still exploding?

Roku’s business differs in fundamental ways from premium streaming companies such as: netflix and walt disney. First of all, it makes streaming devices, which is an entire business in itself. Roku offers a variety of devices that connect your TV to streaming services, as well as their own screens. This is a small business, accounting for only about 10-15% of total sales.

Its main business is selling advertising space to advertising clients through free channels. Premium companies are now moving into this area, but they still charge a monthly subscription fee even for their ad-supported tiers, whereas Roku is completely free. Roku is the leading TV streaming platform by streaming hours in the United States, despite facing strong competition.

Roku is feeling inflationary pressures on its advertising business as advertisers cut their advertising budgets. The platform business recorded its first quarterly decline since listing last year, but has gone further than that. Platform sales in the fourth quarter increased by 13% compared to the same period last year, and overall sales increased by 14%.

While premium companies fight over paid subscriptions, Roku enjoys growing its account base. Active accounts reached 80 million in the fourth quarter of 2023, up 14% year-over-year, and watch time increased 21%. Advertising costs were unable to keep up with subscriber growth, resulting in a 4% decline in average revenue per user. This is an important number for advertisers.

Roku highlighted some important details about streaming trends that are working in its favor. Traditional broadcast TV minutes fell 16% in the fourth quarter, according to Nielsen. Not only did minutes on Roku increase 21%, accounting for a significant portion of those hours, but hours on the Roku Channel also increased by 63%. Streaming minutes per active account increased from 3.8 to 4.1.

Watching Roku’s channels is as free as watching broadcast TV, but with the advantage of a broader lineup of on-demand content. This appeals to viewers who aren’t interested in paying for streaming and only need to invest in one of the Roku devices to connect.

Can Roku Beat the Magnificent Seven?

Considering the famous companies of the Magnificent Seven, it may be hard to believe that many of their stocks have seen massive declines over the years, wiping out significant amounts of value. Investors who held on through the hardships reaped huge profits.

Roku stock has outpaced five Magnificent Seven stocks in the past year, gaining 125%.

ROKU Date by YCharts

The Federal Reserve has promised to cut interest rates this year, and it may begin. Inflation has not eased as quickly as expected, but cuts are still scheduled for now. If that stimulates the economy, as expected, advertisers will have to increase their budgets, and Roku is well-positioned to benefit.

It’s not always easy to keep the long-term picture in mind when considering investments, but Roku’s story seems compelling. Amazon’s streaming devices and content, as well as other big names, are leading the way as they jump into ad-supported streaming to win over new customers and become the go-to choice for free streaming. Streaming continues to grow, and Roku, more than any paid streaming network, will likely drive viewers to switch from watching completely free TV over the next five years.

Roku can clearly outperform many large tech stocks, including the Magnificent Seven, over the next five years or more as it leverages its powerful platform and popular model to attract customers and advertising dollars.