Roku stock price forecast as skirmish with YouTube accelerates

By: Crispus Nyaga
Crispus Nyaga
Crispus is an active trader, where he is followed and copied at Capital.com. He lives in Nairobi with his… read more.
on Jun 16, 2021
  • The Roku stock declined by more than 6% on Tuesday.
  • This decline coincided with news that YouTube was about to run a promotion.
  • The company will provide free devices as it promotes its YouTube 4K service.

The Roku (NASDAQ: ROKU) stock price nosedived by more than 6% on Wednesday as competition in television industry tightened. The shares ended the day at $340, which was 7.5% below the highest level this week. The firm has a market capitalisation of more than $45 billion.

Roku stock
Roku stock chart

Roku competition rises

The Roku stock declined sharply on Tuesday after Alphabet’s YouTube announced that it would give customers a free Google Chromecast and TiVo devices. This giveaway will happen as the company launches 4K content add-on. The company said the following in a comment to some of its customers:

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“To ensure our loyal YouTube TV members have a great watch experience (including the ability to watch 4K content on our optional new add-on service coming soon!), we want to offer you a free TiVo Stream 4K device.”

The announcement came at a time when Google and Roku are going through a difficult time. Roku has already removed YouTube TV app from its app store. In a statement, the company said that it had asked Google not to manipulate search results for Roku. It also asked Google not to force it to share personal information about its customers.

This rivalry pits two of the biggest companies in the industry that is dominated by Roku and Amazon. In the fourth quarter of 2020, the company sold more than 6.3 million devices while Amazon sold more than 13 million. Google sold substantially lower Chromecast devices.

Therefore, the Roku stock price declined as investors feared that Google will tilt the market in its favour thanks to its deep pockets.

The rivarly comes at a tough time for Roku. Its stock price has dropped by more than 30% from its year-to-date high because of the ongoing rotation from lockdown stocks to reopening ones. Still, the company has a good market share and it is enjoying more demand for its advertising business.

So, what next for the Roku stock price? Analysts are mostly optimistic that the company will manage to maintain its growth story. Those at Citi expect the shares will rise to $450, which is substantially higher than  the present $340. Similarly, those at Evercore ISI, KeyCorp, Oppenheimer, and Morgan Stanley expect the shares will rise to more than $400.

Roku stock price analysis

Roku stock price
Roku stock price chart

The daily chart shows that the Roku stock has made some progress, having risen by 23% from the lowest level in May. The stock is stuck at the same level as the 25-day and 50-day exponential moving averages (EMA). It has also formed an inverted head and shoulders pattern and is slightly above the 38.2% retracement level. Therefore, there is a possibility that the stock will bounce back as bulls attempt to retest the year-to-date high of $490.

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