Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Why Roku Stock Climbed to All-Time Highs Today

By Evan Niu, CFA - Dec 21, 2020 at 2:04PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A bearish Wall Street analyst raised his price target on Roku shares. Plus, news of a new strain of COVID-19 is boosting stay-at-home stocks.

What happened

Shares of Roku ( ROKU -8.72% ) have climbed as much as 5% to hit all-time highs today. A bearish Wall Street analyst increased his price target, and news of a new strain of COVID-19 that is circulating in the U.K. has spooked investors and boosted stay-at-home stocks.

So what

Morgan Stanley increased its price target on Roku shares from $150 to $200 while reiterating an underweight (equivalent to a sell) rating. Analyst Benjamin Swinburne has been pessimistic regarding Roku, believing that investors are currently overestimating the ultimate size of the company's total addressable market.

The Roku Channel interface displayed on a wall-mounted TV, with a side table and a potted plant next to it

Image source: Roku.

While Roku has seen engagement soar on its video-streaming platform throughout the pandemic, Swinburne believes the stock's premium valuation compared to peers is unwarranted. The analyst had downgraded shares of Roku about a year ago (before the pandemic hit) due to concerns about decelerating revenue growth, and the stock has gained approximately 160% since then.

Now what

The price target adjustment comes a few days after Benchmark separately raised its price target from $300 to a Street-high $410, following the announcement that Roku had finally secured a distribution deal with AT&T's WarnerMedia for HBO Max.

A new mutated strain of COVID-19 that is even more infectious has rattled investors and overshadowed the positive news that Congress has agreed on a new $900 billion stimulus deal. While broad market indexes are experiencing volatility from the development, stay-at-home stocks that have benefited from the pandemic -- such as Roku -- are rising today.

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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Roku Stock Quote
Roku
ROKU
$207.75 (-8.72%) $-19.86

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
656%
 
S&P 500 Returns
144%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/02/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.