ROKU vs. WBD: Which Ad-Supported Streaming Stock is the Better Buy?

Roku ROKU and Warner Bros. Discovery WBD are two major players betting on the future of ad-supported streaming, but their strategies and execution differ significantly. Roku leads with a platform-first approach built around CTV advertising, while WBD is leveraging its deep content library to grow its ad-lite streaming tier through Max.As ad-supported models gain momentum in the streaming industry, driven by evolving viewer preferences and demand for more affordable content, the question for investors is: Which company is better positioned to capture long-term value? Let’s delve deeper as we compare ROKU and WBD’s approaches to streaming monetization and advertising growth.The Case for Roku StockRoku’s advertising business delivered exceptional results in the fourth quarter of 2024, with advertising revenues growing faster than subscription revenues, even excluding political advertisements, which accounted for 6% of platform revenues. Platform revenues overall rose 25% year over year in the fourth quarter, driven by advertising. Viewership on The Roku Channel surged 82% year over year, significantly expanding Roku’s ad-supported reach. The company also outperformed both the broader and OTT ad markets in the United States.Roku has strengthened its advertising ecosystem through a strategic partnership with Yahoo DSP, enabling better audience targeting via Roku Data Cloud and Roku Exchange. The introduction of innovative ad formats, such as Video Marquee placements on the home screen and interactive Brand Showcases, has significantly boosted engagement. Notably, Neutrogena’s campaign achieved one-third of its exclusive reach through a prominent home screen promotion.The company is also expanding access to CTV advertising through its self-serve platform, Roku Ads Manager, launched in 2024. Designed for small and medium-sized businesses (SMBs), the tool empowers a broader range of advertisers to reach Roku’s vast streaming audience. With CTV ad spending accelerating and Roku leading the space in innovation and scale, the company is well-positioned to outperform the digital ad market in 2025.The Zacks Consensus Estimate for 2025 loss is pegged at 26 cents per share, which has narrowed by a penny over the past 30 days, indicating 70.79% year-over-year growth. The consensus mark for revenues is pinned at $4.59 billion, implying year-over-year growth of 11.52%.Image Source: Zacks Investment ResearchFind the latest earnings estimates and surprises on Zacks Earnings Calendar.The Case for Warner Bros. Discovery StockWarner Bros. Discovery’s streaming advertising strategy is centered around its lower-priced ad-supported tier on Max, which has expanded to more than 45 markets in the past 15 months. This tier is one of the company’s key growth drivers for its DTC business. However, the expansion of this tier has led to a decline in ARPU, with Global ARPU declining 6.3% year over year in 2024, which the company expects will normalize over time.The company is pursuing multiple approaches to advertising across different regions. In the United States, sports and news content has been removed from the ad-lite tier and moved to the premium tier. In Latin America, these formats are available across all packages, while in Europe they are offered as add-ons. The company has stated that it is still experimenting with these models to determine the most effective structure.WBD includes net advertising revenues in its ARPU calculation for the DTC segment. The company has acknowledged that near-term ARPU trends will be negatively affected by international rollouts, lower pricing, and bundling strategies. While the ad-lite tier is growing in reach, its performance is still ramping up, contributing to weaker short-term ARPU.For 2025, the consensus mark for loss is pinned at 13 cents per share, which has widened by a penny over the past 30 days, suggesting 97.19% growth from 2024. The consensus mark for revenues is pegged at $39.03 billion, implying a decline of 0.74% year over year.Image Source: Zacks Investment ResearchStock Price Performance and Valuation of ROKU and WBDIn the year-to-date period, ROKU shares have lost 19.9%, outperforming the decline of 24.1% in WBD shares. Shares of ROKU and WBD have underperformed the Zacks Broadcast Radio and Television industry’s decline of 2.1%.ROKU Outperforms WBD in YTD PeriodImage Source: Zacks Investment ResearchAlthough ROKU’s current price-to-cash flow ratio of 39.72X is ahead of the Zacks Broadcast Radio and Television industry’s 27.12X, this premium valuation reflects investor confidence in the company's growth potential for the rest of 2025. In contrast, WBD’s current price-to-cash flow ratio of 3.66X indicates more cautious market sentiment around its near-term performance.Valuation of ROKU and WBDImage Source: Zacks Investment ResearchWhy ROKU Stock Offers a Better Investment OpportunityRoku offers a more compelling investment opportunity than Warner Bros. Discovery due to its strong execution in the high-growth CTV advertising market. With platform revenues rising year over year and innovative ad products driving engagement, Roku is well-positioned to capitalize on the shift from linear to streaming. Its expanding SMB-focused ad platform and strategic partnerships further enhance monetization potential.Despite recent share price weakness, Roku’s premium valuation reflects confidence in its scalable, ad-driven business model. In contrast, WBD faces ARPU pressure and a less proven streaming ad strategy, making Roku the more attractive pick for long-term growth in digital media. ROKU currently carries a Zacks Rank #2 (Buy), whereas WBD has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. 7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.9% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Warner Bros. Discovery, Inc. (WBD): Free Stock Analysis Report Roku, Inc. (ROKU): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks