Don’t Chase Roku Stock at New 3-Year Highs

• Roku (ROKU) leads U.S. TV streaming platforms, boasting over 60 million active accounts and strong ad-driven growth.
• ROKU exhibits robust technical momentum, with a recent Trend Seeker “Buy” signal and a 60% gain over the past year.
• Revenue and earnings are projected to grow sharply, but the high price-earnings ratio raises near-term valuation concerns.
• Analyst sentiment is mixed, with price targets ranging widely from $50 to $197.

Today’s Featured Stock

Valued at $21.2 billion, Roku (ROKU) is the leading TV streaming platform provider in the United States based on hours streamed. The company reported over 60 million active accounts attributed to the sale of standalone streaming devices, partnerships with TV brands, other leading TV-makers who license the Roku OS to manufacture and sell Roku TV models, and licensing of Roku OS to certain service operators. 

Roku is benefiting from growth in advertising driven by monetized video ad impressions on the increasing popularity of The Roku Channel. Important factors contributing to this growth include the continued growing interest in streaming by traditional TV advertisers, as well as ongoing investment in the company’s OneView ad platform and overall ad tech capabilities. 

What I’m Watching

I found today’s Chart of the Day by using Barchart’s powerful screening functions to sort for stocks with the highest technical buy signals; superior current momentum in both strength and direction, Weighted Alpha above 50+ and a 60-Month Beta over 1.5. I then used Barchart’s Flipcharts feature to review the charts for consistent price appreciation. ROKU checks those boxes. The Trend Seeker issued a new “Buy” signal on June 15. Since then, the stock has gained 2.7%.

Barchart’s Technical Indicators for Roku

Editor’s Note: The technical indicators below are updated live during the session every 20 minutes and can therefore change each day as the market fluctuates. The indicator numbers shown below therefore may not match what you see live on the Barchart.com website when you read this report. These technical indicators form the Barchart Opinion on a particular stock.

Roku scored a 3-year high of $148.88 on June 12.

• Roku has a Weighted Alpha of 82.86.
• ROKU has a 100% “Buy” opinion from Barchart.
• The stock has gained 60.09% over the past 52 weeks.
• Roku has its Trend Seeker “Buy” signal intact.
• The stock recently traded at $144.94 with a 50-day moving average of $134.91.
• ROKU has made 8 new highs and gained 5.98% over the past month.
• 60-month beta of 2.01.
• Relative Strength Index (RSI) is at 64.29.
• There’s a technical support level around $142.86.

Don’t Forget the Fundamentals

• $21.2 billion market capitalization.
• 107.46x trailing price-earnings ratio.
• Revenue is predicted to grow 17.33% this year and another 12.52% next year.
• Earnings are estimated to increase 303.39% this year and an additional 51.10% next year

Analyst and Investor Sentiment on Roku

• The Wall Street analysts followed by Barchart give the stock 9 “Strong Buy,” 2 “Moderate Buy,” and 18 "Hold” opinions with price targets between $126 and $175.
• Value Line does not rate the stock but post price targets from $50 to $197.
• CFRA’s MarketScope rates the stock a “Buy” with a price target of $150.
• Morningstar thinks the stock is fairly valued.
• 122,400 investors are following the stock on Seeking Alpha, which rates it a “Hold” and has a problem with its valuation
• Short interest is 5.59% of the float with 2.52 days to cover the float.

The Bottom Line on Roku

Roku had increases in both revenue and earnings in the past two years and is expected to repeat that in the next two years.  At a 107.46x trailing price-earnings ratio, it’s hard to see much price appreciation in the near term.

Additional disclosure: The Barchart Chart of the Day highlights stocks that are experiencing exceptional current price appreciation. They are not intended to be buy recommendations as these stocks are extremely volatile and speculative. Should you decide to add one of these stocks to your investment portfolio it is highly suggested you follow a predetermined diversification and moving stop loss discipline that is consistent with your personal investment risk tolerance.

On the date of publication, Jim Van Meerten did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.