The San Jose, Calif.-based company started out as a Netflix (NFLX) unit, making the streaming giant’s first set-top-box. But Netflix divested the business in 2007. Roku continued making set-top boxes and added streaming sticks that let consumers access internet video services.
It’s also an aggregator of online video content from a variety of media and internet companies. Most of its revenue comes from selling advertising on its platform. It also gets revenue from third-party services sold through its platform.
“We believe a Roku acquisition would be duplicative with (Comcast’s) own Flex hardware and would add nothing from a content/IP perspective,” Bank of America analyst Jessica Reif Ehrlich said in a report.
Roku is a clear leader among streaming media, acting as a content gatekeeper for various streaming services. Roku stock is benefiting from the launches of new services such as Disney‘s (DIS) Disney+ and Apple‘s (AAPL) Apple TV+. It also added Comcast‘s (CMCSA) Peacock, AT&T‘s (T) HBO Max and ViacomCBS‘s (VIAC) Paramount+.
Roku Stock Leads Group
IBD Stock Checkup assigns Roku a 93 Composite Rating, which gives investors a quick way to gauge a stock’s key growth traits. That puts it at the top of the 21-stock movies and related leisure group, which includes Netflix and meme stock AMC Entertainment (AMC).
Roku’s Earnings Per Share Rating, part of the overall composite score, is a lukewarm 69. That’s primarily because the company has yet to turn an annual profit. Analysts expect EPS of 40 cents to mark its first year in the black, followed by a 168% jump to $1.07 a share next year.
On the technical side, a 92 Relative Strength Rating places Roku in the top 8% of all stocks. Its relative strength line, which compares a stock’s performance to the S&P 500, is close to but still shy of a new high. A move to new highs at or ahead of a potential breakout would be a bullish sign.
Roku stock has already broken out past a 397.79 buy point of a double-bottom base. It’s extended from the 5% buy range, which topped out at 417.68. But the stock has since added a handle, according to IBD MarketSmith chart analysis, which sets up a secondary entry. The handle buy point is 463.09, or 10 cents above the handle’s high.
The correction in the overall pattern was steeper than usual at 44%. But Roku shaped the right side and cleared the 397.79 buy point during two heavy volume up weeks in mid to late June. The handle looks normal.
Roku stock is on the IBD Leaderboard watchlist.
Follow Nancy Gondo on Twitter at @IBD_NGondo
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