One of the hottest tech verticals in the recent past has been the streaming market. The cord-cutting phenomenon has accelerated in the last five years which has resulted in several players joining the streaming race.

While Netflix (NFLX) remains the undisputed leader for online streaming services, it is closely followed by tech giants including Disney (DIS), and Amazon (AMZN). The worldwide streaming market was valued at $50.11 billion in 2020. Its forecast to grow at an annual rate of 21% between 2021 and 2028.

The rapidly expanding market is attracting several new players, such as Roku (ROKU) and CuriosityStream (CURI).  Today I’ll analyze both these companies to determine which is the better buy.

Roku stock is up 1,770% since IPO

Roku went public in late 2017 and has gained a staggering 1,770% since its IPO. This values the stock at a market cap of $59 billion. While Roku is the largest streaming device maker in the world, it currently generates a significant portion of sales from its high-margin platform business that derives revenue from content partnerships and ads.

Further, the Roku Channel is also gaining traction as its ad-supported platform offers a variety of movies and television channels. This shift in product mix has allowed Roku to increase sales from $512 million in 2017 to $1.77 billion in 2020. In the last 12-months, its revenue stands at $2.03 billion.

While it reported an operating loss of $20.25 million in 2020, its operating income in Q1 of 2021 stood at $75.8 million compared to sales of $574 million. Roku’s active accounts have risen from 14.2 million in Q1 of 2017 to 53.6 million in Q1 of 2021 and its average revenue per user has also tripled in this period.

Analysts forecast Roku to increase sales by 55% to $2.76 billion in 2021 and by 38% to $3.81 billion in 2022. Comparatively, its bottom line is also forecast to improve from a loss per share of $0.14 in 2020 to earnings of $1.12 in 2022.

CuriosityStream is valued at a market cap of $581 million

CuriosityStream is a streaming platform that went public in early 2021. Valued at a market cap of $581 million, CuriosityStream has managed to increase sales from $18 million in 2019 to $39.6 million in 2020. Wall Street forecasts sales to rise by 79.1% to $71 million in 2021 and by 73.6% to $123.25 million in 2022.

CuriosityStream has successfully created a niche for itself and is gaining traction as a platform that focuses on educational content. The company has created a hybrid business model as it offers direct-to-consumer or DTC subscriptions. It has also partnered with Hulu and Amazon Prime while bundling its subscriptions in other countries around the world.

CuriosityStream is a small player compared to its peers. But CURI is also an attractive acquisition target as its growing revenue and improving profit margins at an enviable space.

The verdict

Roku stock is trading at a forward price to 2022 sales multiple of 14.8x which is steep.  This same ratio for CURI stock is much lower at 4.7x. However, Roku’s leadership position, diversified revenue model, and positive profit margins are very impressive.  Therefore, I believe ROKU is a better bet for long-term investors. 

ROKU shares were trading at $433.22 per share on Friday afternoon, down $16.38 (-3.64%). Year-to-date, ROKU has gained 30.48%, versus a 18.16% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditya Raghunath

Aditya Raghunath is a financial journalist who writes about business, public equities, and personal finance. His work has been published on several digital platforms in the U.S. and Canada, including The Motley Fool, Finscreener, and Market Realist. More...

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