Roku, Inc. (ROKU) shares rose more than 7% during Tuesday's session after JPMorgan initiated coverage on the stock at Overweight with a $475 price target.

Key Takeaways

  • Roku shares moved sharply higher after JPMorgan initiated coverage on the stock at Overweight with a $475 price target—a 16.3% premium to Friday's close.
  • Analyst Cory Carpenter believes that, as TV ad budgets shift to streaming, Roku will be well-positioned as a leading streaming platform in the United States by hours.
  • The stock remains in overbought territory judging by the relative strength index (RSI) reading, but the moving average convergence divergence (MACD) points to a robust intermediate-term uptrend.

JPMorgan analyst Cory Carpenter noted that Roku is the leading U.S. streaming platform by hours, with over 50 million active accounts and 60 billion hours of content in 2020. With only 8% to 9% of TV ad budgets allocated to streaming, the analyst believes that there is a significant opportunity as ad 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 2021 growth prospects following its recent deals to carry the Peacock and HBO Max streaming services.

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

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From a technical standpoint, the stock broke out to fresh all-time highs. The RSI remains in overbought territory with a reading of 75.94, but the MACD remains in a bullish uptrend. These indicators suggest that the stock could see some near-term consolidation before extending its move higher.

Traders should watch for consolidation above trend line support at $420.00. If the stock extends its breakout, traders could see a move to fresh all-time highs. If the stock breaks down, traders could see a move back into its rising price channel. A further breakdown from these levels could lead to a move toward reaction lows and the 50-day moving average at $312.50.

Tip

In technical analysis, a reaction is a short-term trend reversal in the movement of a security's price. 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 data released.

The Bottom Line

Roku shares moved sharply higher after JPMorgan initiated the stock at Overweight with a $475 price target, citing significant growth potential in streaming ad budgets in 2021 and beyond. While the stock could see some near-term consolidation, the intermediate-term trend remains bullish judging by recent MACD readings.

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