Why Roku Shares Are Surging

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Roku Inc. (NASDAQ: ROKU) shares absolutely exploded last week, and they don’t seem to be slowing down yet. The stock is up about nearly 60% from its initial public offering in late September, or up over 160% from its original pricing of $14 in its IPO. Most of this came as the result of a strong earnings report, but shares surged again Monday following the announcement of a key licensing deal.

When the company reported its third-quarter results last Thursday, Roku said it had a net loss of $0.10 per share on $124.8 million in revenue. Thomson Reuters consensus estimates had called for a net loss of $1.40 per share and $110.47 million in revenue.

During the quarter, active accounts totaled 16.7 million, up 48% year over year. Importantly, more than half of new accounts in the quarter came from licensed sources, a new milestone for Roku, with the largest and fastest-growing portion coming from Roku TVs.

Looking ahead to the fourth quarter, Roku expects to see revenues in the range of $175 million to $190 million and net income loss between $14 million and $8 million. Consensus estimates are a net loss of $0.13 per share and $177.12 million in revenue for the quarter.

This week, Roku announced that Funai Electric has joined the Roku TV licensing program. Funai Electric will leverage the Roku TV platform to build and deliver smart TVs under the Philips brand that run the Roku OS. These Philips Roku TV models are expected to be available in the United States this year.

Peter Swinkels, general manager of Product Planning at Funai Electric, added:

We are excited to work with Roku to deliver an exceptional streaming service on our Philips branded TVs. The Philips brand is a well-known and trusted brand in the U.S. that delivers best-in-class performance TVs. By using the Roku operating system to power Philips branded TVs, our customers will enjoy a simple-to-use interface that offers excellent streaming entertainment and discovery features for smart TVs today. We look forward to delivering new Philips Roku TVs later this year.

Shares of Roku were last seen up over 12% at $37.35, with a consensus analyst price target of $27.00 and a 52-week range of $15.75 to $38.29.