Shares of Roku (NASDAQ: ROKU) charged out of the gate Friday, jumping as much as 14.2%. As of 12:34 p.m. ET, the stock was still up 12.3%.
The catalyst that propelled the streaming video pioneer higher was an upgrade and bullish commentary from a Wall Street analyst.
A compelling opportunity
Guggenheim analyst Michael Morris upgraded Roku stock to a buy from neutral (hold) while raising his price goal to $75. For investors keeping track at home, that represents potential upside of 21% for investors in comparison with Thursday’s closing price.
The analyst believes investors have been missing the forest for the trees but expects that to alter when Roku reports its financial leads to November. The corporate has been making progress on multiple fronts. Roku has been increasing the video promoting revenue from its streaming platform, because of partnerships with third-party demand-side platforms (DSP), in addition to increasing ad sales on its home screen.
Hitting the nail on the pinnacle
The analyst has clearly done his research. Earlier this month, Roku announced its adoption of The Trade Desk‘s (NASDAQ: TTD) Unified ID 2.0, the corporate’s widely adopted audience identity platform, which makes it easier for advertisers to achieve their goal markets. The combination of this technology can be a win-win for each parties, as Roku offers unmatched access to audiences, while The Trade Desk is recognized because the market-leading DSP, in keeping with global consulting firm Frost and Sullivan.
There’s also the matter of Roku’s valuation. The stock was hit hard in the course of the downturn, as ad revenue dried up. Because of this, the stock continues to be down 85% from its high. Moreover, the stock is attractively priced, selling for just 2 times forward sales.
These aspects, combined with the continuing rebound within the promoting market, represent a compelling opportunity for Roku and its investors.
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Danny Vena has positions in Roku and The Trade Desk. The Motley Idiot has positions in and recommends Roku and The Trade Desk. The Motley Idiot has a disclosure policy.
Why Roku Stock Rallied on Friday was originally published by The Motley Idiot