Roku Inc Stock News and Forecast: Why are ROKU shares higher?

Roku shares surged on Wednesday as reports circulated that the company has extended a deal with Alphabet (GOOGL) for YouTube to remain on Roku. The stock surged 18% to close at $256.08. Volume was also extremely high and was the highest since after earnings back in August.

ROKU chart, 15-minute

ROKU stock news

YouTube and ROKU were rumoured to be in talks over a deal, and the companies announced on Wednesday that they had completed a multi-year agreement. Roku and YouTube owner Aphabet (GOOGL) has been at loggerheads for most of 2021 as the companies traded tit for tat arguments as the deal to have YouTube on ROKU's platform neared expiration. ROKU has 56.4 million accounts, while YouTube has over 2 billion monthly users. The deal would have expired today, December 9, and Google had threatened to pull YouTube from Roku.

Commenting on the deal, YouTube said, "This means that Roku customers will continue to have access to YouTube and that the YouTube TV app will once again be available in the Roku store for both new and existing members. We are pleased to have a partnership that benefits our mutual users.”

Roku said, "This agreement represents a positive development for our shared customers, making both YouTube and YouTube TV available for all streamers on the Roku platform.”

The deal was likely a relief rally as in our view ROKU would have the most to lose. The terms of the agreement are not clear, but YouTube is a serious draw and is available on other streaming services, so this would have been a significant loss for ROKU. There have also been rumours circulating over ROKU losing Amazon Prime Video, so that is the next issue if true, but this certainly sets up optimism that a deal can be reached if that is the case.

ROKU stock forecast

Now that a large uncertainty has been resolved, it is unclear how much further the stock can push on. The losses in 2021 can be attributed to a number of factors, but there is no doubt the uncertainty over this deal has definitely contributed. The last set of results saw the share price punished as supply chain issues and forecasts were a factor despite a large beat on EPS. Revenue was behind. 

The move yesterday has seen a huge spike in the Relative Strength Index back above 50 and a crossover in the Moving Average Convergence Divergence (MACD). Resistance at $280 is next up, but it is not until above $300 that the stock will look more attractive to medium and longer-term players. The 200-day moving average is a long way off at $344. Holding above $235, the breakout point yesterday, is key for short-term momentum in our view. 

ROKU 1-day chart

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