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Why Roku Stock Jumped 6.6% on Tuesday

By Anders Bylund – Sep 8, 2020 at 2:30PM

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The media-streaming technology veteran is set up for great returns from today's low prices, according to Wells Fargo analyst Steven Cahall.

What happened

Shares of media-streaming technology expert Roku (ROKU 1.22%) jumped as much as 6.6% higher on Tuesday thanks to a bullish report from a respected analyst firm. By 2 p.m. EDT, the stock had retreated to a gain of 3.8%.

So what

Wells Fargo analyst Steven Cahall picked up coverage of Roku with a price target of $215 per share and an "overweight" rating. The analyst recommends adding money to your Roku holdings because he expects the stock to rise 34% above Friday's closing prices over the next year or so. Cahall sees "above-expectation" growth in Roku's average revenue per user (ARPU) due to a dominant market position and advanced technology platform.

A rocket takes off from a portable screen.

Image source: Getty Images.

Now what

Cahall believes that Roku is a "future heavyweight" in the making, tapping into explosive growth in the digital media market while expanding internationally. The company is also winning more negotiating leverage with advertisers and content publishers through its market-leading number of users and devices, which should turn Roku into a serious challenger for premium cable networks and other traditional media outlets.

The stock has now gained 19% in 2020, but it's still a small fish in a big pond with a market value of less than $21 billion. Yes, this exciting growth stock is a strong buy right now.

Anders Bylund owns shares of Roku. The Motley Fool owns shares of and recommends Roku. The Motley Fool has a disclosure policy.

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