Roku Stock Breaks Out After Strong Earnings

Roku, Inc. (ROKU) shares broke out to fresh 52-week highs during Thursday's session after the company reported better-than-expected first quarter earnings. Revenue rose more than 50% to $206.7 million, beating consensus estimates by $16.9 million, and net losses fell to nine cents per share, beating consensus estimates by 17 cents per share. Active accounts jumped 40% to 29.1 million, streaming hours rose 74% to 8.9 billion and average revenue per user (ARPU) rose 27% to $19.06.

The company's second quarter and full-year guidance also came in higher than analysts were expecting. Management anticipates second quarter revenue of between $220 million and $225 million, which is above the $219.5 million consensus. Meanwhile, management anticipates full-year revenue of $1.03 billion to $1.05 billion, which was higher than the $1.02 billion that analysts were expecting to see.

Analysts reacted positively to the earnings beat, but most remain neutral on Roku stock given the valuation. For example, Wedbush's Michael Pachter raised his price target from $55 to $65, saying that the company has "substantial" growth opportunities, but he added that the current price already reflects these sentiments. RBC Capital remains more bullish with a $90 price target, while Citi kept its Sell rating on the shares.

From a technical standpoint, the stock broke out from trendline resistance to fresh 52-week highs. The relative strength index (RSI) moved into overbought levels with a reading of 78.42, but the moving average convergence divergence (MACD) remains in a bullish uptrend. These indicators suggest that the stock could see some near-term consolidation, but the overall trend remains bullish following the earnings.

Traders should watch for some consolidation between R2 resistance at $79.58 and trendline support at around $65.00 over the coming sessions. If the stock breaks out higher, traders could see a move further into fresh highs. If the stock breaks down from trendline support, traders could see a move toward S1 support and the 200-day moving average near $55.00, although that scenario appears less likely to occur.

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