Roku's first-quarter forecast disappointed investors
Streaming TV technology provider Roku Inc (NASDAQ:ROKU) exploded onto the Wall Street scene after going public back in late September, mostly thanks to a huge post-earnings surge from early November to mid-December that saw the shares rally from just under $20 to nearly $59. ROKU stock settled at $51.10 yesterday -- corresponding with a $5 billion market cap -- but in premarket trading it's down 18%, mostly due to a current-quarter sales outlook that was lower than expected. However, the company's fourth-quarter top- and bottom-line results topped estimates.
And even with Roku set to sell off this morning, analysts are seemingly taking a glass-half-full approach. In fact, Morgan Stanley and RBC raised their respective price targets to $32 and $45. While the former firm suggested it's concerned about the stock's valuation, it foresees strong profit growth for 2018. RBC, meanwhile, said it sees the growth story continuing in the short term.
Mixed reviews are nothing new for ROKU shares, with the six brokerage firms in coverage almost evenly split between "buy," "hold," and "sell" ratings. On the other hand, these latest price-target hikes may not be surprising since the stock's consensus 12-month target comes in at just $33.20.
Options traders were taking a call-slanted approach ahead of the event, evidenced by long calls outpacing puts roughly 17,500 to 8,700 over the past two weeks across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Peak open interest sits at the March 55 call, though data shows sell-to-open activity at this strike, as well.
Even if the pre-market losses come to fruition, ROKU would open near the $42 level -- right above the round $40 mark and triple the company's IPO price. This area provided strong support for the stock in recent months, and is roughly double the site of the where the equity was trading ahead of that post-earnings bull gap from November.
