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Media-streaming technology expert Roku (ROKU -1.98%) found a clear signal on Friday, sending the stock as much as 7% higher in the early afternoon. The jump also had staying power as Roku’s shares closed the day 6.8% higher.
Some stock price moves are simple, but this jump is not. Roku’s shares rose for several unrelated reasons today.
I see three significant details contributing to Roku’s price gains:
Each one of these price-boosting events might not have moved Roku’s needle very much, but they combined for a greater effect. Furthermore, the stock was a bit more spring-loaded for a sudden gain today after a 3.9% price drop on Thursday. Today, investors seem to have forgiven Roku for cutting 200 jobs in a cost-cutting effort.
All things considered, Friday’s modest price increase doesn’t change my view that Roku is incredibly undervalued and a fantastic investment right now.
The stock trades at 2.9 times sales, which is a reasonable ratio for a sleepy bank or a soft drink giant — not a streaming media powerhouse whose annual sales multiplied by six over the last five years. I think Wood is onto something here.
Anders Bylund has positions in Roku. The Motley Fool has positions in and recommends Roku. The Motley Fool has a disclosure policy.
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