Should You Buy Roku Stock After Its Partnership With Amazon?

On June 16, Roku (ROKU 0. 50%) announced a partnership with Amazon (AMZN 2. 66%) that will allow advertisers access to the ing specialist's ecosystem through Amazon's advertising platform

This agreement represents a significant move forward for Roku

Although the stock has encountered some headwinds over the past year, this new development once again highlights why Roku stock is worth in for those focused on the long game

Let's dig deeper into this partnership between Roku and Amazon -- as well as the rest of the former's -- to understand why

The value of Roku's ecosystem Amazon is a notable player in the connected TV (CTV) market

However, Roku continues to reign supreme -- it holds a leading market in the U

Amazon's size advantage has not allowed it to take over the top spot, and it's now partnering with its longtime rival

This is a win for Roku too

Image source: Getty Images

One significant long-term opportunity for the company is the continued switch from cable to ing for viewers and advertisers

However, a highly fragmented CTV landscape presented advertisers with several challenges, including difficulties in reaching targeted audiences across various platforms and effectively managing ad frequency

Roku noted in a recent press release: Early tests of this integration have shown significant results

In other words, advertisers should get greater returns from the same amount of spending

The deal helps address some pain points they had and helps sell even more companies on the benefits of pouring ad dollars into the kind of platform that Roku offers

It's worth highlighting again that this deal is valuable to every party involved, largely because of Roku's leading CTV ecosystem

It also points to the strength of its network effect

Since the value of Roku's platform only increases as its audience numbers grow, partnerships of this kind could become more common

Beyond Roku's headwinds Roku has encountered some issues in recent years

Its average revenue per user (ARPU) has stalled, while it remains unfitable

Though the company no longer reports the ARPU metric, management previously attributed poor ARPU growth to the company's expansion efforts in outside the U. , where it is focusing on scale first, rather than monetization

That's the same blue it ed in its more mature when it sometimes sold its namesake devices at a loss to onboard enough households within its ecosystem

Investors have seen the results of this strategy in the U. , where Roku already holds a leading market

This should give investors confidence that it can achieve similar results in other regions

What the persistent red ink on the bottom line

Investors vastly prefer fitable companies, especially in this uncertain economic and geopolitical environment

But Roku is making strides in this department too

The company's net loss per was $0. 19, an imvement from the $0. 35 per loss it reported in the prior-year quarter

Roku might not be consistently fitable, but the company is growing its top line at a good clip and making gress on the bottom line

And overall, the company is still in a great position to cash in on the massive long-term shift from cable to ing

And here's one more thing that makes the stock attractive

Roku's forward price-to-sales ratio is 2. 6 as of this writing

In a stock market at all-time highs and valuations reaching unsustainable levels, Roku's modest valuation is especially rare for a growth stock in a leading industry position

For this and all the other reasons, it's worth purchasing the company's s

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors

Sper Junior Bakiny has positions in Amazon

The Motley Fool has positions in and recommends Amazon and Roku

The Motley Fool has a disclosure policy.