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How Roku Shares Rose 13% in December

By Anders Bylund - Jan 6, 2021 at 10:43AM

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The maker of media-streaming hardware and software scored a key content win, and the market saw it coming.

What happened

Shares of media-streaming technology expert Roku ( ROKU -2.24% ) gained 13.1% in December 2020, according to data from S&P Global Market Intelligence. The impressive surge hinged on two key events, which arguably boil down to the concept of content deals creating market value for the company.

So what

First, highly respected stock analyst Jason Bazinet lifted his target price on Roku shares from $220 to $375 per share, driving the stock more than 5% higher. The analyst, who also reiterated his buy rating on the stock, argued that new content distribution deals and international expansion should boost Roku's revenue growth. Bazinet also said that Roku's user accounts are becoming more valuable over time.

Bazinet's analysis was underscored the next week when Roku finally signed a long-term distribution deal with video-streaming service HBO Max, owned and operated by AT&T subsidiary WarnerMedia. Speculation about the brewing deal was capped by a final agreement, lifting Roku's stock 10% higher in a three-day span.

Close-up photo of a business handshake in front of a few dozen TV screens, all showing different content.

Image source: Getty Images.

Now what

Roku has brought together streaming services from all of the emerging sector's major players. The company is also tying the room together on the hardware side of things, where Roku has established itself as the leading provider of user-friendly presentation software.

I expect Roku to be a market-beating part of my portfolio for many years to come and fellow contributor Daniel Sparks agrees.

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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Stocks Mentioned

Roku Stock Quote
$205.55 (-2.24%) $-4.71
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AT&T Inc.
$23.46 (1.78%) $0.41

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