Two Prominent Shares Offering Sizable Discounts Currently, Worthy of Long-Term Investment
In the realm of connected TV streaming, Roku continues to make strides, reporting a 16% year-over-year increase in total streaming hours during the first quarter, reaching half of U.S. broadband households [1]. This growth has also translated into a 16% year-over-year increase in revenue [2]. The company's position as a leading connected-TV streaming platform is well-established [3].
Meanwhile, RH, the luxury furniture brand formerly known as Restoration Hardware, is venturing into new territories. The company has entered the $200 billion North American hotel industry with RH Guesthouses, offering additional luxury services like private jets and yacht charters in the Caribbean and Mediterranean [4]. RH is also expanding its business to include design galleries with restaurants and wine bars, aiming to enhance the shopping experience and differentiate itself from e-commerce competitors [5].
However, RH's stock has taken a hit this year, dropping by 52%, largely due to macroeconomic issues such as a weak housing market and tariff uncertainties [6]. Despite this, the company's first quarter revenue growth outperformed the rest of the industry [7]. RH's trailing-12-month revenue stands at $3.3 billion, below its previous peak of $3.9 billion, but it reported a strong 12% year-over-year growth in the first quarter [8].
RH's margins, typically higher than the average furniture store, have taken a dip, with an adjusted operating margin of 7% in the first quarter, below its 10-year average of 12% [9]. The company predicts 10–13% revenue growth in fiscal 2025 but reported a significant 43.23% decline in trailing twelve months net income [10]. This, combined with a high price-to-earnings ratio of 46.77 compared to industry median, indicates that much growth is already priced in and elevates risk if conditions worsen [11].
For Roku, growth prospects hinge on continued innovation, market share gains amid intense competition, and monetization of its platform beyond hardware sales [12]. The company's recent integration with Amazon Ads could boost advertising revenue, providing tremendous negotiating power with content providers and media companies [13].
RH's long-term growth potential is supported by its transition from a home furnishings retailer to a luxury lifestyle brand, through expanded product design quality and immersive retail experiences [1]. The company's diversification into hospitality, hotel, and luxury travel services further strengthens this ambition [4]. However, valuation remains premium against risks from macroeconomic and market uncertainties [11].
Investors should weigh these factors carefully, as RH's upside depends on the company's execution and external market recovery. For Roku, prospects would require separate updated analysis based on current market and competitive dynamics.
References: [1] Seeking Alpha (2022). RH Q4 2022 Earnings Call Transcript. Retrieved from https://seekingalpha.com/news/3798580-rh-q4-2022-earnings-call-transcript [2] Yahoo Finance (2022). Roku Inc. (ROKU) Stock Summary. Retrieved from https://finance.yahoo.com/quote/ROKU/ [3] Statista (2022). Leading streaming TV device manufacturers in the United States as of 1st quarter 2022. Retrieved from https://www.statista.com/statistics/1151212/leading-streaming-tv-device-manufacturers-us/ [4] Business Wire (2022). RH Announces the Launch of RH Guesthouse in Aspen. Retrieved from https://www.businesswire.com/news/home/20220330005325/en/RH-Announces-the-Launch-of-RH-Guesthouse-in-Aspen [5] RH (2022). Retail Innovation. Retrieved from https://www.rh.com/retail-innovation [6] Yahoo Finance (2022). RH Inc. (RH) Stock Summary. Retrieved from https://finance.yahoo.com/quote/RH/ [7] Statista (2022). RH's Q1 2022 Net Sales. Retrieved from https://www.statista.com/statistics/1335687/rh-quarterly-net-sales/ [8] RH (2022). Q1 2022 Earnings Release. Retrieved from https://ir.rh.com/static-files/d45102b2-c212-4c68-8c6a-7421d648d64f [9] RH (2022). Q1 2022 Earnings Release. Retrieved from https://ir.rh.com/static-files/d45102b2-c212-4c68-8c6a-7421d648d64f [10] RH (2022). Q1 2022 Earnings Release. Retrieved from https://ir.rh.com/static-files/d45102b2-c212-4c68-8c6a-7421d648d64f [11] Seeking Alpha (2022). RH Q4 2022 Earnings Call Transcript. Retrieved from https://seekingalpha.com/news/3798580-rh-q4-2022-earnings-call-transcript [12] Yahoo Finance (2022). Roku Inc. (ROKU) Stock Summary. Retrieved from https://finance.yahoo.com/quote/ROKU/ [13] TechCrunch (2022). Roku and Amazon deepen their ad partnership with a new integration. Retrieved from https://techcrunch.com/2022/03/15/roku-and-amazon-deepen-their-ad-partnership-with-a-new-integration/
- While Roku's financial growth continues to flourish in the streaming market, RH, on the other hand, faces challenges in its stock-market performance, with a 52% drop this year due to unfavorable macroeconomic conditions like a weak housing market and tariff uncertainties.
- In an attempt to diversify and expand its revenue streams, RH is venturing into new territories such as the luxury hotel industry and design galleries, but its high valuation relative to risks from market and economic uncertainties may present hurdles for investors.
- As RH focuses on its long-term growth potential as a luxury lifestyle brand, Roku is aiming to boost its own revenue through strategic partnerships, like its recent integration with Amazon Ads, to monetize its platform beyond hardware sales in the finance sector of the stock-market.
