Why Roku Stock Is Up By 10% Today
Roku Stock Rallies After Company Reaches Deal To Keep YouTube And YouTube TV On Its Platform
Shares of Roku gained upside momentum after reports indicated that the company managed to reach a deal with Google which will keep YouTube and YouTube TV apps on Roku.
Roku stock has been under strong pressure in recent weeks as the deal with Google was set to expire in December. If companies failed to reach a deal and YouTube was removed from Roku, its stock would have found itself under significant pressure.
The multi-year extension for YouTube and YouTube TV removes the key risk for Roku, and it’s not surprising to see that the stock is up by roughly 10% in today’s trading.
What’s Next For Roku Stock?
Analysts expect that Roku will report earnings of $1.58 per share this year and $1.62 per share in the next year, so the stock is trading at roughly 145 forward P/E.
It should be noted that Roku stock traded near $490 in July but later found itself under significant pressure together with other high-flying pandemic-era leaders. While the stock has lost more than 50% of value in less than half a year, its high valuation remains a concern.
It remains to be seen whether the market will be able to tolerate such valuation levels in case Treasury yields continue to move higher and the Fed gets closer to raising interest rates.
Roku is the second biggest position of the famous ARK Innovation ETF, and traders must watch its performance closely as the continuation of the sell-off in ARKK will inevitably put more pressure on Roku stock.
In the near term, the YouTube deal removed the key risk and may provide additional support to Roku stock. In the longer-term, Roku will need to show solid growth rates or its stock will face another sell-off.
For a look at all of today’s economic events, check out our economic calendar.