Why Is Roku Surging Today?


Roku ROKU stock has risen more than 12% percent since yesterday’s close of $33.02. This burst can be credited to the announcement of a partnership with ESPN, which will run its new EPSN+ program through the Roku platform.

On top of the already comprehensive ESPN channel, ESPN+ will now allow viewers access to the English Football League, UEFA Nations League, PGA Tour Golf, Top Rank Boxing, MLS, Grand Slam Tennis, and many other matches and games. All of these will be streamed through Roku.

In a public statement released earlier in the week, Scott Rosenberg, SVP/GM of the Platform Business for Roku, said he is happy to be “giving consumers more sports content from their favorite pastimes than ever… Roku customers that subscribe to ESPN+ will enjoy access to more live sports events, original shows and films, exclusive studio programs and ESPN’s unmatched on-demand library.”

Today’s news is creating significant momentum for Roku, pressuring investors to make a decision as soon as possible: get in before the curve? Or stay out of this spur of growth?

For the current quarter, all earnings estimate revisions have been positive (3), but for the next quarter (4), current year (4), and next year (4) they have been split down the middle. This being said, one must consider how recent the news of the joint venture has come out publicly. There is potential for coming estimate revisions to be overwhelmingly positive.

With numbers such as these it can be hard to find confidence in making concrete investment decisions. Some may find ease knowing Point72, an Asset Management hedge fund run by Steve Cohen recently bought up a 5% stake in Roku. This was released to the public Monday.

Meanwhile, our Earnings Expected Surprise Prediction (ESP) for Roku is currently at 7.69% for the current quarter, 27.78% for the next quarter, and 55% in the next year. This typically a strategy that highlights potential earnings beats by focusing on the most recent analyst estimates, but from a distance, it does help show that forward-looking estimates have been strong recently.

The stock is still down about 40% year-to-date, but despite a rough start to the year in terms of share prices, Roku is beginning to show investors it’s not done yet. The company’s recent rise has moved the company to a “B” grade for Momentum in our Style Scores System. Roku currently sports a Zacks Rank #3 (Hold).

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