Roku Stock Pops on Pre-Earnings Bull Note

Rosenblatt raised its price target to $190 from $145

Lillian Currens
Aug 4, 2020 at 12:29 PM
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The shares of streaming staple Roku Inc (NASDAQ:ROKU) are running up the charts in anticipation of the firm's second-quarter earnings report -- expected out after the close tomorrow, Aug. 5. ROKU was last seen up  2.7% at $166.21 -- pacing for its highest close in nearly a year, and its third consecutive daily win. This positive price action is undoubtedly being helped along by a price-target hike to $190 from Rosenblatt. The analyst cited a shift in ad revenue from to connected TV from traditional linear television.

The stock's 20-day moving average has also helped ROKU along on the charts -- capturing several pullback since mid-June. And while the shares were briefly consolidating below $160, Roku stock broke north of this level yesterday and is now set for its second consecutive close north of here since November 2019. Plus, the equity now boasts a roughly 24% year-to-date return. 

ROKU August 4

There's still some lingering skepticism among the brokerage bunch, however. While nine call it a "buy" or better, five tepid "holds," and two "strong sell" ratings remain on the table. Plus, the 12-month consensus price target of $141.61 is an eyebrow-raising 14.2% discount to current levels, meaning more upgrades and/or price-target hikes could be on their way. 

Meanwhile, options players have been incredibly bullish ahead of Roku's earnings event. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), 3.06 puts have been picked up for every call during the past 10 weeks. This ratio sits higher than every other reading from its 12-month range, meaning long calls haven't been more popular during the past year. 

Short interest on ROKU is retreating, too -- down 16.1% in the last reporting period. The 9.83 million shares sold short still represent nearly 12% of the stock's available float, however, which could lead to a short-squeeze situation, should these bears continue to hit the exits.

It's worth looking back at some of the outsized moves Roku stock has made after a few of its earnings reports over the past two years, including a 28.1% surge in May 2019, and a 22.3% plummet back in November 2018. During these past two years, the security averaged a next-day return of 18.5%, regardless of direction, which is right nearly line with the 17.4% swing the options pits is pricing in this time around. 

 


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