Shares of Roku (ROKU) closed lower in today’s trading as investors await its Q4 earnings results on February 13 after the market closes. Analysts are expecting earnings per share to come in at -$0.41 on revenue of $1.15 billion. According to TipRanks’ data, this equates to 25.5% and 16.8% year-over-year increases, respectively.
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Interestingly, though, Roku may not be done growing yet. Indeed, five-star Wedbush analyst Alicia Reese recently maintained a Buy rating on Roku stock due to the company’s promising financial outlook and strategic initiatives. Reese expects Roku to exceed $200 million in annual earnings in 2024, thanks to rapid growth in its advertising business and international presence. The company’s ability to capture a larger market share as advertising shifts from traditional TV to connected TV, along with its expanding platform and new content features, supports a positive outlook.
Separately, JMP Securities’ 4.5-star analyst Matthew Condon noted that Roku has room to grow in the streaming space due to its leading TV operating system, popular Roku Channel, and growing online advertising business. Condon also pointed out that Roku reaches over 90 million households worldwide each month and is well-positioned to benefit from the shift of advertising dollars to streaming platforms, particularly with the growth of sports content and live entertainment.
What Do Options Traders Anticipate?
Using TipRanks’ Options tool, we can see that options traders are expecting a 13.6% move from ROKU stock in either direction right after its earnings report. The expected earnings move is determined by calculating the at-the-money straddle of the options closest to expiration after the earnings announcement.
It’s worth noting that ROKU’s after-earnings price moves in the past 12 quarters have mostly been larger than the 13.6% that is expected. This implies that current option prices might have a decent chance of being profitable and are potentially undervalued.
What Is the Fair Value of Roku Stock?
Overall, analysts have a Moderate Buy consensus rating on ROKU stock based on eight Buys, two Holds, and three Sells assigned in the past three months, as indicated by the graphic below. After a 14% decline in its share price over the past year, the average ROKU price target of $83.69 per share implies 1% downside risk.
