Is Roku (ROKU) a Good Stock to Buy before Earnings?

Business Insider

01-05-2025

Shares of Roku (ROKU) closed lower in today's trading as investors await its Q1 earnings results on May 1 after the market closes. Analysts are expecting earnings per share to come in at -$0.26 on revenue of $1.01 billion. According to TipRanks' data, this equates to 25.7% and 14.6% year-over-year increases, respectively.
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Interestingly, analysts at Citizens JMP seem to be optimistic about Roku's performance going forward. Indeed, the investment firm recently reiterated its Outperform rating and $95 price target on Roku after attending the company's Roku Experience event in New York City. In a note to investors, the firm said it came away from the event even more confident in Roku's unique operating system and its ability to boost platform monetization. The analysts added that they believe Roku is well-positioned to keep improving how it generates revenue from its platform.
Separately, it is also worth noting that Roku's active accounts have been steadily increasing over the past five years, according to Main Street Data. At the same time, the average revenue per user has stabilized at around $40 over the past few years.
What Do Options Traders Anticipate?
Using TipRanks' Options tool, we can see that options traders are expecting a 13.9% move from ROKU stock in either direction right after its earnings report. The expected earnings move is determined by calculating the at-the-money straddle of the options closest to expiration after the earnings announcement.
It's worth noting that ROKU's after-earnings price moves in the past 12 quarters have mostly been larger than the 13.4% that is expected. This implies that current option prices might have a decent chance of being profitable and are potentially undervalued.
What Is the Fair Value of Roku Stock?
Overall, analysts have a Moderate Buy consensus rating on ROKU stock based on 14 Buys, nine Holds, and one Sell assigned in the past three months, as indicated by the graphic below. Furthermore, the average ROKU price target of $94.19 per share implies 38.2% upside potential.