Roku Stock Breaks Out After a Strong Second Quarter

Revenue and earnings exceeded analyst expectations

Roku, Inc. (ROKU) shares soared more than 20% during Thursday's session after the company reported better-than-expected second quarter financial results. Revenue rose 59.5% to $250.1 million, beating consensus estimates by $26.7 million, and net losses came in at eight cents per share, beating consensus estimates by 13 cents per share. The company surpassed 30 million active accounts, while average revenue per user rose $2.00 to $21.06 for the quarter.

Analysts jumped to upgrade the stock following the blowout quarter. Stephens upgraded Roku to Overweight with a price target of $120 per share, while Rosenblatt upgraded the stock to a Buy with a $134 price target. The analysts note that Roku continues to outsell, Inc.'s (AMZN) Fire TV and believe that international expansion could become the company's next big growth driver looking ahead.

The company predicts third quarter revenue of $250 million to $255 million and a net loss of $40 million to $34 million. Full-year revenues are projected to reach $1.075 billion to $1.095 billion with EBITDA of $30 million to $40 million.

Chart showing the share price performance of Roku, Inc. (ROKU)

From a technical standpoint, the stock broke out from its prior highs made in mid-July to fresh 52-week highs following the strong results. The relative strength index (RSI) rose toward overbought levels with a reading of 68.32, but the moving average convergence divergence (MACD) could see a near-term bullish crossover. These indicators suggest that the stock could see some near-term consolidation before moving higher.

Traders should watch for consolidation above trendline support and prior highs near $115.00 over the coming sessions. If the stock rebounds higher, traders could see a move to break out from upper trendline resistance. If the stock moves lower, traders could see a move toward lower trendline support at around $100.00 before a renewed attempt higher.

The author holds no position in the stock(s) mentioned except through passively managed index funds.

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