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Why Roku Shares Gained 45% in November

By Anders Bylund - Dec 7, 2020 at 10:44PM

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Even longtime bears are warming up to this high-octane growth stock nowadays.

What happened

Shares of Roku ( ROKU 0.58% ) rose 45% in November 2020, according to data from S&P Global Market Intelligence. The surge started with a strong earnings report on Nov. 5, but the bulk of Roku's November gains rested on bullish analyst notes.

A hand holds a TV remote in front of a wall of 120 TV sets, all showing different programs.

Image source: Getty Images.

So what

Roku's third-quarter sales rose 73% year over year to $452 million. The bottom line flipped from a loss of $0.22 to earnings of $0.09 per share. The results left analysts eating dust across the board. The share price surged as much as 13.6% higher the next day, resulting in a year-to-date return of 89%. These gains evaporated quickly as many investors decided to cash in some of their Roku winnings.

The next 10% spike arrived on Nov. 19 when analyst firm Pivotal Research raised its Roku rating from "sell" to "neutral." Pivotal analyst Jeff Wlodarczak had maintained his "sell" rating of Roku since February 2019, so that ended a long-lived bearish opinion. Wlodarczak cited positive comments on Roku's competitive advantages by Liberty Media chairman John Malone, whose analysis of the media industry carries a lot of weight due to his decades of proven success in that sector. Malone has said that Roku is poised to create a "long-term profitable global business."

Now what

Roku shares are setting all-time highs on a daily basis right now, and the stock has soared 124% higher in 2020. This isn't a cheap stock by any measure, but the skyrocketing revenue and subscriber growth should continue driving share prices higher for years to come. If you're looking for a long-term growth stock in today's market, Roku is one of the best buys out there.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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