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Why Roku Stock Jumped Monday

By Daniel Sparks – Jul 13, 2020 at 2:21PM

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Are shares of the streaming-TV platform headed to $180?

What happened

Shares of Roku (ROKU 3.77%) headed higher on Monday, rising as much as 8.6%. As of 2:20 p.m. EDT, the stock was up by 2.6%.

The growth stock's gains followed an analyst's decision to increase his 12-month price target for the stock while reaffirming his buy rating.

A group of people watching TV together

Image source: Getty Images.

So what

Benchmark analyst Daniel Kurnos raised his price target for Roku shares from $153 to $180, citing likely outperformance in the company's advertising business and its earnings before interest, taxes, depreciation, and amortization if the economy experiences a V-shaped recovery from the current recession.

While the amount of time people spend streaming video is up due to so many people spending so much more time at home, Roku's advertising business took a hit toward the end of Q1 as businesses impacted by the lockdown reduced or paused their advertising spending. As the U.S. economy reopens, that spending could rebound. But with new COVID-19 cases spiking across much of the country, it's unclear how quickly that reopening will occur.

Now what

Investors will get a better idea of how Roku's ad business has been faring when the company reports its second-quarter results. The streaming-TV specialist typically delivers those in early August. 

Daniel Sparks owns shares of Roku. The Motley Fool owns shares of and recommends Roku. The Motley Fool has a disclosure policy.

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