What happened
Shares of Roku (ROKU 6.62%) jumped on Thursday, rising as much as 7.4%. As of 1 p.m. ET, however, the stock was up 3.7%.
The stock's gain comes as shares rebound from a recent sell-off. Analysts seem to be largely in agreement that the clobbering the stock took on Wednesday due to Universal Electronics' win in a patent case against Roku was overdone.
Image source: Getty Images.
So what
Analysts from Susquehanna, Oppenheimer, and Benchmark said in notes to investors this week that Universal Electronics' patent win would have little to no impact on Roku's business. The pullback was an "overreaction," said an Oppenheimer analyst, who also called the decline a buying opportunity.
The stock's decline on Wednesday worsened an already brutal sell-off for the stock this year. Shares are far below their 52-week high of $491.
Now what
Oppenheimer's urging to buy the stock on this pullback may be good advice for patient investors. While volatility in the growth stock will likely continue, the company's strong revenue growth recently suggests Roku is still early in its growth story. Moreover, the company's advertising revenue is still only a fraction of the estimated $67.5 billion in annualized ad spend still going to traditional TV advertising in the U.S. (according to eMarketer). As streaming continues grabbing market share from traditional television, Roku is well positioned to benefit from this massive tailwind both in the U.S. and globally.
While there are certainly risks to owning any stock, many of the risks facing Roku seem to be priced into the stock's more conservative valuation following a big slide in its stock price.
