Roku Inc (NASDAQ:ROKU) Stock Sees Sudden Jump: Will It Continue?
Video streaming is bigger than ever and as internet speeds continue to go up, it is here to stay and grow. That brings us to the subject of the video streaming company Roku Inc (NASDAQ:ROKU), which saw its stock hit its highest level in just more than a year. The rally in the stock was triggered by the company’s positive projections with regard to its quarterly revenues.
The stock soared by as much as 31.41% on Friday and it is likely to be on the radars of investors this morning. The gain made by the stock last Friday was the biggest single-day gain it recorded since November 2017. It is also necessary to note that the stock has gained more than 100% in 2023 so far. The strong move in the stock also led to the addition of a $3 billion market cap.
On the previous day, Roku had reported quarterly results for the period ended in June, which had proven to be better than expectations. The company noted that during the course of the quarter, it had added 1.9 million active accounts. The projections offered by the company were also better than consensus estimates.
The optimism from the company stemmed from a boost in digital ad sales. It was a continuation of a trend that had been seen in the strong ad sales in the quarterly results recorded by Alphabet and Meta Platforms in the same week. In light of the performance and guidance, many brokerage firms raised the price target for the Roku stock as well.
Analysts at DA Davidson noted that the company was confident in the diversion of advertising dollars to move OTT from television. However, Roku management expected the usual current challenges in the advertising trends to last.
The company’s boost in ad sales could certainly be seen as a factor behind the optimism among investors and could be seen as one of the reasons why investors ought to keep an eye on Roku. However, there are two other major factors that investors could consider with regard to the Roku stock. The company is no longer going to be dependent on streaming along since it is diversifying its business aggressively.
The company’s Roku branded TVs may not have sounded particularly enticing at first, but the product, which is sold through Best Buy exclusively, managed to generate meaningful sales. Additionally, it won awards too. Anthony Wood, the company’s Chief Executive Officer noted that while TVs would never become a core of its business, it would help Roku in adding new accounts effectively. The company also came up with a simple media streaming platform operation, which managed to make progress in markets like Western Europe and South America.
The addition of 1.9 million new active accounts was a major development for the company during a tough economic climate was a major achievement for Roku. Additionally, the streaming hours also went up 21% faster year on year and stood at 25.1 billion hours for the second quarter. These two things indicate that the core business could be on the right track.