Comparing NFLX and ROKU: Which Ad-Supported Streaming Stock is a Better Investment?

The competition between streaming giants Netflix and Roku is heating up as they both shift towards ad-supported models to boost growth. Netflix has seen a 30% increase in its stock price this year, while Roku has bounced back almost 60% from its lows. Investors are now trying to figure out which one is the better long-term investment option.

Netflix’s move towards advertising has been a game-changer, with the company doubling its ad revenues last year and expecting to do the same this year. More than half of new Netflix subscribers are now opting for ads, showing a shift in how the company makes money. Their lineup of hit shows like Stranger Things and Squid Game continues to draw in viewers and drive revenues, with second-quarter earnings reaching $11.08 billion, up 16% from last year.

Roku, on the other hand, remains the top streaming platform operator in North America, selling more devices than its competitors combined. The company is making strides with platform revenues and is set to become profitable by the end of the year. However, challenges like declining hardware sales and tough competition from big players like Amazon and Google are still on the horizon.

When it comes to valuation, Netflix trades at a higher P/S ratio compared to Roku, reflecting its consistent profitability and strong growth. Netflix has outperformed Roku in terms of stock performance this year, with shares soaring approximately 35.1% year to date.

In conclusion, while both companies have their strengths, Netflix seems to have the upper hand as an investment opportunity. Its massive scale, content dominance, and growing advertising business make it a solid choice for investors. With a slate of blockbuster shows lined up for 2025, Netflix’s future looks bright.