Why Roku Stock Blasted Nearly 9% Higher on Friday
A pair of analyst price-target increases capped a winning week for the shares of Roku (NASDAQ: ROKU) on Friday when the streaming video platform gained 9% in reaction to those moves. By contrast, the S&P 500 index could only muster a 0.9% improvement.
Double price-target hikes
The two prognosticators behind the Roku raises were Truist's Matthew Thornton and Citigroup's Jason Bazinet. Thornton upped his price target to $75 per share from $70, and Bazinet added $2 to his for a new level of $80. Both maintained their equivalents of hold recommendations.
In explaining his move, Thornton provided four main reasons. Among these is his belief that the quarter was "well ahead across the board" for Roku's business. He was also encouraged that the company's fourth-quarter guidance tracks or exceeds his current estimates, and that it is making some progress on cost efficiencies while focusing more on free cash flow.
Although the twin raises rest on a foundation of hold recommendations, they are nevertheless encouraging because they are the latest in a series. Since Roku published those third-quarter figures after market hours on Wednesday, a clutch of analysts have been quick to increase their price targets on the stock.
Accelerating growth
That wasn't particularly surprising. While Roku missed the average analyst estimate for profitability by a wide margin, it did convincingly top expectations for revenue. And top-line growth of 20% year over year was significantly better than the second-quarter improvement of 11%. The former was fueled by what CEO Anthony Wood described as a solid recovery in video ads; this portends very well for the company.
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Citigroup is an advertising partner of The Ascent, a Motley Fool company. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Roku and Truist Financial. The Motley Fool has a disclosure policy.
