Roku Stock Breaks Out After Preliminary Q1 Numbers

Roku, Inc. (ROKU) shares rose more than 10% during Tuesday's session after preliminary first quarter numbers showed an increase in growth. Since mid-March, the stock has experienced a robust turnaround from lows of below $60.00 per share to current levels of nearly $110.00 per share.

The streaming TV provider reported an estimated 39.8 million active accounts at the end of the first quarter, representing a net increase of 3 million over the prior quarter. The company also reported a 49% year-over-year increase in streaming hours to 13.2 billion during the first quarter, although a new "Are you still watching?" feature could reduce streaming hours in future quarters.

While operational growth remains strong, Roku withdrew its previous 2020 outlook, citing uncertainty surrounding the COVID-19 outbreak. The company expects some marketers to pause or reduce ad investments over the near term, resulting in a potential revenue hit. The company also drew down its credit facility to increase liquidity and ended the first quarter with an estimated $587 million in cash and equivalents.

From a technical standpoint, the stock broke out from reaction highs and the 50-day moving average at $103.23. The relative strength index (RSI) moved toward overbought conditions with a reading of 62.68, but the moving average convergence divergence (MACD) continued to trend higher. The indicators suggest that the stock could see some near-term consolidation.

Traders should watch for consolidation above reaction highs and the 50-day moving average at $103.23 over the coming sessions. If the stock breaks down from these support levels, traders could see a move to reaction lows of around $80.00 or $60.00 over the intermediate term. If the stock rebounds, traders could see a move to the 200-day moving average at $123.29.

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