Is now the time to buy Roku stock?

By: Wajeeh Khan
Wajeeh Khan
Wajeeh is an active follower of world affairs, technology, an avid reader, and loves to play table tennis in his free… read more.
on May 10, 2021
  • Craig Johnson and Danielle Shay comments on Roku's stock.
  • The U.S. firm reported market-beating quarterly results last week.
  • Roku shares are currently 30% down versus their February high.

Roku Inc. (NASDAQ: ROKU) published its quarterly earnings report last week that resulted in an 11.5% increase in the stock on Friday. Despite the surge, Craig Johnson of Piper Sandler says there’s still more juice left in the stock that is trading more than 30% down compared to its year-to-date high of £332 per share in early February.

Craig Johnson’s remarks on CNBC’s “Trading Nation”

Johnson said on CNBC’s “Trading Nation” on Monday:

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“There’s no question the primary trend is still higher for Roku. From my perspective, the stock has gotten oversold. It seems like a pretty good entry point and a pretty good upgrade here for Loop.”

Loop Capital Markets lifted its rating on Roku to ‘buy’ and its price target to $450 last week as the company reported its highest revenue growth rate since going public in 2017. Its shares are now trading close to the 200-day moving average.

According to Johnson, since Roku is forecasting over 40% of revenue growth for the future, the stock is still likely to favour uptrend. Once the per-share price tops $362, the short-term downtrend will come to an end, setting the stage for a rally back to $480.

Danielle Shay expresses concerns about Roku’s long-term potential

Danielle Shay of Simpler Trading, on the other hand, expressed concerns about Roku’s long-term potential on CNBC’s “Trading Nation”. The director of options said:

“Right now, it looks good, but what about three, four, five years down the line? They run the risk of becoming like TiVo or a VCR that no one’s going to need when over time, TVs simply just become smart TVs.”

Shay reiterated that Roku faces serious overhead resistance as the streaming wars progress and competition continues to get fiercer. A better option, she added, would be to put your money in the exchange-traded fund XLC (Communication Services Select Sector SPDR Fund) that tracks streaming services stocks, including Disney, Netflix, Discovery, AT&T, and ViacomCBS.

Such an investment, she commented, is safer as you are bidding on the streaming wars at large that broadens the scope of your investment, instead of confining it within the bound of a single player, Roku Inc. Roku is currently exchanging hands at £219 per share versus £224.74 per share at the start of the year. At the time of writing, it is valued at £29 billion and has a price to earnings ratio of 380.33.

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