Roku Inc. (ROKU) has had a challenging start to 2020, though it’s followed the S&P 500’s performance somewhat closely. While Roku experienced a multi-month downward trend in price, more recently, it has seen improvement. As of April 17, Roku’s stock has fallen by 5.3% versus the S&P 500’s decline of about 11%.
Roku has one of the top TV streaming platforms in the U.S., and as such, has felt the impact of the recent COVID-19 pandemic, much like its competitors. In recent weeks, Roku’s stock has jumped, likely due to a growing demand for programming by consumers who are following government advisories and mandates to “stay at home.”
Institutions Are Buying
Institutions overall were buying the stock, with the number of aggregate 13F shares increasing by approximately 5.6% as of December 31, 2019, to roughly 65.7 million shares from 62.2 million shares three months earlier. Roku saw positive hedge fund activity, as they increased their total 13F shares by about 12.3%, bringing shares up to approximately 25.1 million from 22.3 million.
Overall, 25 hedge funds created new positions, with 31 adding to existing ones, 31 closing out their holdings, and 31 reducing their stake. Also, Roku had a favorable fourth quarter heat map rating of twenty.
Disappointing Estimates though Analysts Are Bullish
Despite a recent upturn in the stock, there appears to be a reason for cautious optimism. Roku’s earnings before interest, taxes, depreciation, and amortization (EBITDA) are estimated to decrease by approximately $34.1 million for 2020. And yet, Roku saw its most significant growth in weeks with an approximately 15% increase. Roku anticipates continued increases in new accounts and streaming hours, which could explain positive actions by investment firms, despite COVID related hits to the advertising market. Berenberg Bank initiated coverage of the company with a buy rating, and Rosenblatt Securities maintained its buy rating.
While downturns in the advertising market have understandably negatively impacted Roku, these are viewed as short-term. Roku has recently seen a rise in value as viewer trends change for Roku’s benefit in response to COVID-19 related lifestyle adaptations. There’s reason to believe that many of the new customers will remain once the pandemic dust settles, even if viewing hours may decline. Bullish investors and analysts are in Roku’s corner.