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Why Roku Stock Shot Up 6%

By Rich Smith – Sep 15, 2020 at 11:57AM

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A Wall Street analyst sees better-than-average growth prospects.

What happened

Despite a global pandemic that confined much of the population to its homes -- watching TV -- for much of this year, shares of over-the-top streamer Roku (ROKU 4.77%) haven't benefited nearly as much from COVID-19 lockdowns as you might expect. In fact, over the past 52 weeks, Roku shares are underperforming the S&P 500, up just 5% in a market that has risen 12.5%.

But perhaps not for long.

Today, shares of Roku are rising 5.7% as of 11:35 a.m. EDT -- thus accounting for all the stock's gains in the past year, and more. If you own shares of Roku stock, you can probably thank the friendly analysts at KeyBanc for this turnaround.

Arrow angles up on a green stock chart

Image source: Getty Images.

So what

Last night KeyBanc analysts initiated coverage of Roku stock with an overweight rating and a $228 price target, reports Despite the stock's lackluster performance this year, Roku has in fact grown its audience size, notes the analyst. It's just that, relative to its peers, Roku hasn't monetized its audience very well so far.

Now what

KeyBanc believes, however, that over time, Roku will grow its ad-supported channels, and its ad revenue, "faster ... than consensus contemplates." Combined with a recovery in advertising spending generally as the economy gets back on track, and international expansion into other markets, this makes Roku stock a better-than-average investment, in KeyBanc's estimation -- and perhaps even a good enough investment to deliver 36.5% profits to new investors today.  

So far at least, it seems investors are inclined to agree with that assessment.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Roku. The Motley Fool has a disclosure policy.

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