Roku Moves Further into Overbought Territory After Analyst Upgrade

Roku Inc. (ROKU) shares rose more than four percent during Wednesday's session after DA Davidson raised its price target from $135 to $185 per share. Analyst Tom Forte believes that the rise of OTT is only at the "top of the third inning" and that the "secular shift" from linear TV to OTT content is "just beginning," which is setting the stage for an "arms race" for proprietary content that is driving the industry.

The analyst believes that Roku could benefit from the billions that are being spent across the industry on proprietary content and its superior understanding of the international OTT structure. The company's independent status within the industry puts it in a unique position to partner with many different companies rather than trying to complete head-to-head with Netflix Inc. (NFLX), Disney Co. (DIS), or others.

In late-August, William Blair analyst Ralph Schackart projected that the company's active account growth would track higher than Netflix at parallel stages in the business. The analyst believes that the stock could double through 2024 given these robust growth rates, reaching 80 million active accounts by the end of 2025.

From a technical standpoint, the stock broke out to fresh all-time highs for the fourth consecutive session. The relative strength index (RSI) rose further into overbought territory with a reading of 83.22, but the moving average convergence-divergence (MACD) extended its bullish rally. These indicators suggest that the stock could see some near-term consolidation, but the long-term uptrend remains intact.

Traders should watch for some consolidation above reaction highs and the pivot point at around $133.55 over the coming sessions. If the stock breaks out higher, traders could see a move toward R2 resistance at $190.84. If the stock breaks down from support levels, traders could see a move toward S1 support and the 50-day moving average at around $116.24.

Chart courtesy of TrendSpider.com. Author holds no position in the stock(s) mentioned except through passively managed index funds.