Key points to remember
- Shares of Roku rose sharply after JPMorgan hedged the stock at Overweight with a price target of $475, a 16.3% premium to Friday’s close.
- Analyst Cory Carpenter believes that as TV advertising budgets shift to streaming, Roku will be well positioned as the top streaming platform in the US by hours.
- The stock remains in overbought territory judging by the relative strength index (RSI), but the moving average convergence divergence (MACD) indicates a robust medium-term uptrend.
JPMorgan analyst Cory Carpenter noted that Roku is the leading streaming platform in the United States by hours, with more than 50 million active accounts and 60 billion hours of content in 2020. With just 8 to 9 % of TV advertising budgets allocated to streaming, analyst believes there is significant opportunity as advertising budgets shift to streaming in 2021 and beyond.
The move comes shortly after Macquarie raised its price target from $275 to $460. Analyst Timothy Nollen cited Roku’s growth prospects for 2021 following its recent deals for streaming services Peacock and HBO Max.
From a technical standpoint, the stock has reached new all-time highs. The RSI remains in the overbought territory with a reading of 75.94, but the MACD remains in an uptrend. These indicators suggest that the stock could experience a decline in the short term consolidation before extending its movement upwards.
Traders should watch for consolidation above the trendline Support at $420.00. If the stock extends its breakout, traders could see a move to new all-time highs. If the stock breaks down, traders could see a return to its upside price channel. A further breakdown of these levels could lead to a move towards reaction lows and the 50-day moving average at $312.50.
In technical analysis, a reaction is a short-term trend reversal in the price movement of a security. Reactions are most often associated with a downward movement in the price of a security after a period of upward movement, often in response to news or published data.
Roku shares rose sharply after JPMorgan launched the overweight stock with a price target of $475, citing significant growth potential for streaming ad budgets in 2021 and beyond. While the stock may see some consolidation in the short term, the medium term trend remains bullish judging by recent MACD readings.
The author does not hold any positions in the stocks mentioned, except through passively managed index funds.