Roku's Technical, Fundamental Outlook Looking Bright

Roku Inc ROKU shares gained another 3% on Thursday and are now up 352% year to date as the company’s advertising business continues to gain momentum. Heading into the closing weeks of 2019, Roku shares seemingly have both fundamental and technical momentum in the near-term.

A Fundamental Look At Roku

RBC Capital analyst Mark Mahaney this week estimated Roku will generate $600 million in ad revenue this year. That ad revenue will continue to grow at a staggering rate to hit $1.5 billion by 2022, according to Mahaney.

Roku now has 32.3 million active accounts averaging more than 3.5 hours per day on its platform. In addition, Roku’s 44% share of all U.S. streaming video hours is more than double its nearest competitor, Amazon.com, Inc. AMZN at just 20%. Assuming Roku can fend off competition from Amazon, Comcast Corporation CMCSA, AT&T Inc. T and others in 2020, investors can expect some robust fundamental growth numbers from Roku in the next several quarters.

A Technical Look At Roku's Stock

From the technical side, Olivetree sector strategist Dan Forman said this week he has flipped back to the bull camp on Roku following its December sell-off. Forman has been both bullish and bearish on Roku in the past year, starting with his bull call heading into last year’s Consumer Electronics Show about a year ago.

Most recently, Forman was bullish following the stock’s initial post-earnings dip, but turned bearish once again after the stock rallied from $116 to $168 heading into December. This week, Forman said he’s bullish on Roku once again.

“We want to reverse our opinion on ROKU, especially into Holiday sales and CES,” he said. “We suggest look to calls for the week of 1/10/20 for CES.”

For now, Forman said the stock is getting technical support from the top of a descending triangle technical pattern pictured below. The top of the descending triangle may have flipped from resistance to support following a break-out to the upside in mid-November.

Benzinga’s Take

Short-term traders looking to trade the bounce in Roku stock heading into CES 2020 may be able to capture some momentum. However, longer-term investors should be aware it may take the market a while to digest those huge 2019 returns before the stock potentially makes new highs once again.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.

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