Bull Notes Galore for ROKU After Earnings Beat

The equity is already up over 110% year-over-year

Digital Content Manager
Nov 6, 2020 at 11:57 AM
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The shares of Roku Inc (NASDAQ:ROKU) are up 10.9% at $249.47 at last check, earlier hitting a record high of $252.37, after the streaming device maker reported better-than-expected third-quarter earnings, and revenue that is up 73.1% from a year ago. As a result, the security earned no fewer than 11 price-target hikes this morning, including a huge one from D.A. Davidson to $300 from $190. The analyst in question sees significant growth opportunities for the company, citing the addition of The Roku Channel to Amazon's (AMZN) Fire TV platform as a major milestone.

On the charts, the equity has experienced unprecedented growth this year. Shares have more than quadrupled off a March 17 annual low of $58.22, with constant support from the 60-day moving average over the past several months. Year-over-year, ROKU sports an impressive 110.6% lead.

Analysts were already optimistic toward Roku stock coming into today, with 11 of the 18 in question sporting a "buy" or better rating, and seven carrying a tepid "hold" or worse. Meanwhile, the 12-month consensus target price of $216.21 is a hefty 14% discount to current levels. 

Digging deeper, shorts are already hitting the exits, though there is still plenty of pessimism to be unwound. Short interest is down 13.4% in the last two reporting periods, but the 6.35 million shares sold short still account for 7.8% of the stock's available float. 

An unwinding of pessimism in the options pits could also push the security higher. This is per ROKU's Schaeffer's put/call open interest ratio (SOIR) of 1.26, which sits higher than all readings from the past year. This suggests short-term option traders have rarely been more put-biased.

This shift seems to be already happening today. So far, 103,000 calls have crossed the tape -- eight times what is typically seen at this point, and more than twice the number of puts traded. The weekly (and expiring) 11/6 250-strike call is the most popular, followed by 240-strike call in the same weekly series, with positions being opened at both as investors expect more upside for ROKU by the end of the day.


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