What Happened?

Shares of streaming TV platform Roku (NASDAQ: ROKU) jumped 7.4% in the afternoon session after JMP initiated coverage on the stock with a Buy rating and a $95 price target. The firm highlighted ROKU's strong position as a "top streaming platform in the U.S." and also cited the potential for the company to benefit from increasing ad spend in the connected TV market.

After the initial pop the shares cooled down and closed the day at $79.68, up 4.9% from previous close.

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What The Market Is Telling Us

Roku’s shares are very volatile and have had 22 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business. 

The biggest move we wrote about over the last year was 11 months ago when the stock dropped 22.3% on the news that the company reported fourth-quarter results and provided slightly underwhelming outlook for the coming quarters. The company lacked specificity that the market craves when discussing its full-year 2024 EBITDA forecast (it stated that EBITDA would be "positive" rather than sharing a number - Wall Street was expecting $100 million of EBITDA for 2024). 

Management cited challenging macroeconomic conditions and an uneven ad market recovery, and they anticipate seasonal revenue declines in line with Q1 2023, alongside tough year-over-year growth rate comparisons in streaming services distribution and a challenging media and entertainment landscape. 

Additionally, the company has averaged 8% upside to Wall Street's revenue estimates since Q3 2022, so Roku's more modest beat this quarter may be causing investors to level set with regards to expectations. 

On a more positive note, Roku beat analysts' revenue expectations as it grew its user base and outperformed in its Platform and Devices segments. Its revenue guidance for next quarter also topped analysts' expectations. Overall, this quarter's results seemed mixed, but the market was likely expecting more.

Roku is up 9.3% since the beginning of the year, but at $81.44 per share, it is still trading 17.4% below its 52-week high of $98.57 from February 2024. Investors who bought $1,000 worth of Roku’s shares 5 years ago would now be looking at an investment worth $596.06.

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