A big win for Roku (NASDAQ:ROKU) following earnings suggests investors should continue to tune into ROKU stock for buying opportunities in the days and weeks ahead. So is it time to join the pack?
Wall Street’s massively bullish reaction to ROKU stock’s latest earnings confessional is proving the stock market is a market made up of stocks. Shares of Roku hit new highs for a second straight day and are on pace to finish up nearly 26% this week despite trade war negotiations dragging the mid-cap S&P 400 down by nearly 3.65% for the five-day period.
Behind the impressive performance, Roku, the market’s largest over-the-top streaming content provider, smashed Wall Street estimates across-the-board when it reported earnings Wednesday night. Highlights of the Q1 confessional include strong ad sales growth of 79%, total streaming hours surging by 74% to 8.9 million hours, a loss of just 9 cents per share versus forecasts of 26 cents and overall revenues of $207 million topping expectations of $190 million.
And the forecast looks even brighter for Roku as Disney (NYSE:DIS) enters the streaming market with its Disney+ service this fall. The move has the entertainment giant going head-to-head against Netflix (NASDAQ:NFLX) and Amazon (NASDAQ:AMZN), which as Roku’s CEO noted, “When they win, we win in terms of economics.”
I’d go on to state, investors are also positioned to keep winning on the price chart of ROKU, but having a bit of patience is key.
ROKU Stock Weekly Chart
Let’s start by stating that as a mid-cap growth stock shares of ROKU are inherently volatile. This means owning Roku stock can be punishing if purchased too early and aggressively nasty, even when an uptrend, like the one today, is in place. Having said that, ROKU is likely to give investors a stronger buying opportunity next week.
With Friday’s highs near channel resistance, nearly completing a Fibonacci two-step pattern, and given the size of this week’s gains, the technical assessment is Roku stock is more likely than not to offer bulls a pullback pattern.
Typically and for a smaller cap, growth name like ROKU, this counter-trend formation could be expected to be very brief and not terribly deep before a resumption of momentum takes hold. Given today’s questionable broader market, buying into a two- to maybe five-day pullback in conjunction with shares holding above $75 looks about right in Roku’s trade war with bears on the price chart.
Disclosure: Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies, related musings or to ask a question, you can find and follow Chris on Twitter @Options_CAT and StockTwits.