Why Roku, Inc. Stock Climbed 15.1% in May

What happened

Shares of Roku Inc. (NASDAQ: ROKU) jumped 15.1%, according to data from S&P Global Market Intelligence, after the streaming media platform company delivered strong quarterly results and positive commentary from an unlikely source.

On the former, early last month Roku announced that revenue in its first quarter climbed 36% year over year to $136.6 million — well above even the high end of its previous guidance a range of $120 million to $130 million — including 106% growth in Platform segment revenue to $75.1 million. Roku shares surged 6% the following day as investors digested the news.


So what

Then later in the month, Roku stock popped again after infamous short-seller Citron Research revealed that it had reversed its prior short position on the company following the quarterly report. Instead, Citron surprisingly argued that, with its stock trading at a discount to peers and its shift in focus toward the platform business (and away from hardware sales) gaining steam, Roku could be an attractive acquisition candidate.

Sure enough, analysts on Wall Street have begun to take notice. Roku shares are up another 17% so far in the month of June, most recently helped by encouraging comments from analyst firm Keybanc Capital Markets. More specifically, Keybanc argued that Roku’s accelerating Platform user growth could create a virtuous cycle where advertisers and content distributors alike flock to the product, in turn helping it become a more viable alternative as cord-cutters continue to flee their cable subscriptions.

Now what

To be fair, Keybanc set a $44 price target on Roku stock, which represents only a slight premium from its current levels after the recent rise. But between its strong quarterly results, short-sellers reversing course, and analysts piling on, that rise appears to be well deserved. And if Roku can sustain its business momentum to continue to outgrow its peers, I think the stock could have more room to run from here.

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Steve Symington has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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