Roku Inc (NASDAQ:ROKU) is trading up 6.3% today at $110.92, fresh off a record high of $111.84, after CrispIdea upgraded the stock to "buy" from "hold," and boosted its price target to $115 from $65.40. The equity research firm cited four reasons for its bull rating, including surging revenues for the streaming name, as well as international growth.
Given ROKU stock's impressive technical showing, one would assume analysts were already bullish on the equity, but that's not the case. Prior to today, 53% of covering brokerages maintained a "hold" or "strong sell" rating, while the average 12-month price target sits all the way down at $83.63.
Meanwhile, short interest on Roku spiked nearly 17% in the most recent reporting period to 8.17 million shares, accounting for a healthy 10% of the stock's available float. Such low expectations create buying power on the outperforming stock, and more bull notes or a round of short covering could translate into tailwinds for the shares.
Today's options traders are positioning for more upside. Amid accelerated volume -- 151,000 options have traded so far, three times what's typically seen at this point -- the July 110 call is most active. It looks like new positions are being purchased here for a volume-weighted average price of $2.33, which would make breakeven for the call buyers at the close this Friday, July 17, $112.33 (strike plus premium paid).
Since bottoming at an annual low of $26.30 on Dec. 24, Roku shares have shot up 325%. More recently, the equity's upside was been fueled by a big bounce off its 40-day moving average in late June/early July, and the shares yesterday pulled back to within one standard deviation of this notable trendline. Per Schaeffer's Senior Quantitative Analyst Rocky White, there have been five other times ROKU stock has pulled back to this trendline after a lengthy stretch above it, and the shares were up 6.8%, on average, one month later.