Roku Stock Skyrocketed on Friday. Investors Should Be Paying Attention.

Roku (NASDAQ:ROKU) has been something of an enigma for shareholders. Despite being at the top of its game, the stock hasn't gotten the respect it deserves. Yet the company's business is firing on all cylinders. However, investors have started to come around, and the stock has gained 78% over the past year.

In the latest move, the stock spiked more than 20% on Friday on reports that the company has been in discussions to be acquired by a major U.S. media company, according to Bloomberg, citing "people with knowledge of the matter."

It appears that investors haven't been the only ones taking a fresh look at the streaming pioneer. Let's review Roku's recent results, understand what might make the company attractive to a potential suitor, and why investors shouldn't sleep on these reports.

Image source: The Motley Fool.

A lot to like

After years of operating losses and investing to enter new markets, Roku turned the corner in Q2 of 2025 and has been profitable in every quarter since. Perhaps as importantly, the company continues to increase its market share and expand its reach, building the foundation for future growth. Its recent results help paint a rosy picture.

In the first quarter of 2026, Roku generated total revenue of $1.2 billion, up 22% -- marking the company's strongest year-over-year quarterly growth in four years. The results were driven higher by its platform segment, which includes advertising revenue, which increased 27%, and subscriptions, which jumped 30%. Overall, platform revenue rose 28% to $1.1 billion, while device revenue declined 16% to $118 million. Roku sells its devices at or near cost to draw viewers into its ecosystem (more on that later).

The company continues to find new ways to augment that strategy, which keeps paying off. Last year, Roku launched its own paid streaming channel, named Howdy. The subscription service launched in August at a modest price tag of just $2.99 per month to attract more price-sensitive customers. Roku seeded its ad-free channel with thousands of titles totaling 10,000 hours of entertainment, with programs and movies from Lionsgate, Warner Bros. Discovery, and FilmRise. It also included select Roku original programming.

While critics quickly dismissed the service as too little, too late, Roku was undaunted. In the ensuing months, Howdy has racked up more than 1 million subscribers, according to a report by industry analyst Antenna. The report also noted that Howdy had enviable retention rates, with 51% of those who signed up in the first month were still subscribers six months later, far exceeding the retention rates of premium and specialty and subscription video on demand (SVOD) services, at 47% and 38%, respectively.

Another winning strategy has been The Roku Channel -- the company's home-grown ad-supported channel -- which closed out 2025 with a 3% share of all U.S. TV viewership, according to Nielsen. The channel ranks in the Top 10 among all media companies, putting Roku in select company alongside Alphabet's YouTube, Disney, and Netflix, among others. Roku previously revealed that The Roku Channel ranked No. 2 on its platform in terms of engagement.

If that weren't enough, Roku announced earlier this year that it had surpassed 100 million households worldwide, illustrating its growing global reach. Moreover, the company's decision to sell its devices at or near cost is paying off: Roku's collection of branded TVs and other streaming devices are used by "more than half of all U.S. broadband households."

Roku's large and expanding reach makes it an attractive target for a potential acquirer, giving them instant access to more than 100 million households. But even if Roku isn't acquired, it has all the pieces in place for a successful future, which makes it an attractive stock for investors.

The recent spike in its share price has skewed its valuation, selling for 40 times next year's expected earnings. However, measured using the more appropriate forward price/earnings-to-growth (PEG) ratio -- which takes into account Roku's rapid growth -- clocks in at 0.19, when any number less than 1 is the standard for an undervalued stock.

That's why investors shouldn't sleep on Roku -- merger or not.

Danny Vena, CPA has positions in Alphabet, Netflix, Roku, and Walt Disney. The Motley Fool has positions in and recommends Alphabet, Netflix, Roku, Walt Disney, and Warner Bros. Discovery. The Motley Fool has a disclosure policy.