Why Roku Stock Is Up By 6% Today

Roku Stock Gains Ground After Company Announces New Animation Series

Shares of Roku gained strong upside momentum after the company announced its first adult animated scripted series.

The stock also enjoyed a boost as traders rushed to buy shares of tech companies after the recent sell-off.

Some bottom-picking is clearly in play here as Roku stock declined from the $490 level in July 2021 to the recent bottom near the $160 level.

ARK Innovation ETF, which holds a significant position in Roku, is also enjoying a rebound today as traders look ready to buy beaten tech stocks after a long pullback.

What’s Next For Roku Stock?

It looks that the announcement about the new animated series was not the main catalyst for Roku stock today.

Roku shares were oversold, and traders were ready to buy them when the general market sentiment towards tech stocks improved.

While a 6% move looks good, it’s just a blip on the chart as Roku stock is down by roughly 65% from its highs.

Analysts expect that Roku will report earnings of $1.65 per share in 2022, so the stock is trading at more than 100 forward P/E despite the huge pullback.

In this light, Roku’s near-term fate will depend on whether the market will be ready to support high-PE stocks. Analysts do not expect a significant increase in Roku’s earnings from 2021 to 2022 (estimated EPS for 2021 is $1.58), and it remains to be seen whether current valuation is justified by modest growth levels.

Of course, the market is always ready to look beyond the next year when it looks at a tech stock, but the continued increase in Treasury yields and the upcoming Fed moves on rates may force market players to be more conservative, which will be bearish for Roku.

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