Is it time to invest in Roku shares after Guggenheim upgraded to buy?

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Sep 23, 2021
  • Roku shares on Thursday spiked 3.63% after Guggenheim analysts upgraded to buy.
  • Analyst Michael Morris issued a price target of $395.00 per share implying a 21.5% upside potential.
  • Roku has expanded its ad business in Canada, a significant growth catalyst according to Morris.

On Thursday, Guggenheim analyst Michael Morris upgraded Roku Inc. (NASDAQ:ROKU) shares from neutral to buy with a price target of $395.00 per share. The stock spiked more than 3.60% as investors reacted to the analyst note.

The analyst points to potential catalysts from the connected TV ad growth and international expansion, whilst also noting ROKU shares are more than 30% off the current 52-high of $49.76 achieved in July.

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Morris also noted Canada’s TV streamers’ inclination to use ad-supported streaming channels like Roku as a significant catalyst.

Why buy Roku shares in Q4 2021?

Although Roku shares are down about 30% from the July highs, the stock still looks steeply-priced at a P/E ratio of 192.86. Therefore, value investors could find it less exciting as a short-term investment.

However, with analysts expecting ROKU earnings per share to grow by nearly 73% this year before rising by more than 28% next year, growth investors could find the stock a compelling option for their portfolios.

Therefore, with so many growth catalysts highlighted by the Guggenheim analyst, they could be the perfect catalyst for a significant rebound in ROKU shares.

Source – TradingView

Can the Roku stock price rebound continue?

Technically, although Roku shares seem to be trading under significant bearish bias, the stock has recently bounced back to avoid slipping to the oversold conditions of the 14-day RSI.

However, with the stock still trading several levels below the 100-day moving average, and with more room to run before reaching overbought conditions, the upward movement seems poised to continue.

Therefore, investors can target extended rebound profits at approximately $371.26 or higher at $399.70. On the other hand, $307.51 and $278.41 are crucial support levels.

Bottom line: it may not be too late to buy Roku shares?

In summary, although Roku seems to be trading under significant bearish pressure, the stock has recently bounced back, surging closer to the resistance trendline. 

Moreover, with analysts expecting ROKU earnings to grow significantly this year and next year, its recent upgrade could be the catalyst for a major rally.

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