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Why Roku Stock Jumped on Friday

By Daniel Sparks – Aug 28, 2020 at 11:50AM

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Today's gain for the streaming-TV platform extends its strong momentum this week.

What happened

Shares of Roku (ROKU -3.87%), a provider of a streaming-TV platform, soared on Friday. As of 10:30 a.m. EDT, the stock was up 9.5%.

Roku's gain on Friday extends the stock's impressive momentum this week, which has largely been driven by bullish analyst commentary and a strong appetite in the market for growth stocks like Roku.

A chart showing a stock price moving higher

Image source: Getty Images.

So what

The first bullish note from an analyst this week came on Monday when Citigroup analyst Jason Bazinet initiated coverage of Roku stock with a buy rating and a $180 price target. The analyst noted that the company's active accounts could grow to 70 million by 2022. Then, on Thursday, Deutsche Bank analyst Jeffrey Rand, who has a buy rating on the stock, said that not only is adoption of connected TV steadily rising in the U.S., but Roku also continues to be the leader in this important market. 

Also helping the stock this week has likely been the broader-market momentum in growth tech stocks. Highlighting this, the tech-heavy Nasdaq Composite is up 2.9% this week while the Dow Jones Industrial Average is up only 0.8%. And many rapidly growing large-cap and megacap tech stocks have risen more than 5% this week.

For the full week, Roku stock was up 19% as of this writing.

Now what

While Roku didn't provide any specific guidance in its most recent business update, the company's strong second-quarter momentum suggests the coronavirus pandemic isn't hurting the streaming-TV specialist's business much. Revenue was up 42% year over year, driven by a 46% jump in platform revenue (that is, revenue primarily from Roku's share of subscriptions and advertising on its platform).

Management did say it expects its overall revenue to "grow substantially on a year-over-year basis in the second half and for the full-year 2020, albeit not as strongly as we had anticipated prior to the pandemic." 

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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