- Business Insider reported on rumors about someone acquiring Roku.
- Hearsay from company employees says the buyer is Netflix.
- ROKU stock is down 80% from all-time high.
Roku (ROKU) stock has advanced nearly 12% on Wednesday morning after Business Insider reported on rumors that Netflix may be interested in buying the streaming platform and hardware provider. At the moment shares are trading hands one hour into the session for $104.51, up 11.9%.
Business Insider reported that the fact that Roku has closed its employee trading window for insiders recently, a move that often foreshadows a material change in a stock, has left employees of the company reading the tea leaves and predicting that Netflix will buy them out. This may make sense since ROKU stock is down some 80% from its all-time high. Executives and key people at the corporation are paid in stock, and some say the share price is leading to a talent exodus.
Additionally, after the most recent earnings call that showed Netflix losing subscribers for the first time in a decade, management said it was considering a move into the advertising business with a cheaper version of Netflix paid via targeted ads. Targeted video ads are exactly Roku’s strong point, so the union might be a perfect fit if it can be accepted by regulators.
Not everyone is happy about the rumor, though.
Rich Greenfield, co-founder of Lightshed Partners, told CNBC that he thinks Roku would be a poor acquisition for the king of streaming. “I think this is one of the more absurd things I’ve ever heard,” Greenfield said. “Netflix owning hardware, prioritizing that hardware compared to the thousands of devices that Netflix runs on seems completely antithetical to everything that [co-CEO] Reed Hastings and [co-CEO] Ted Sarandos have built.”
Roku Stock Chart: Next target at $110.50
ROKU shares are stuck around $104 in the first hour of trading. In order to continue the rally, ROKU shares need to rally past the early May high of $110.50. One good trend is that the Moving Average Convergence Divergence (MACD) indicator has crossed over in recent weeks and the blue MACD line is beginning to grow its distance from the orange signal line.
In the past month and a half, ROKU stock has put in a triple bottom on the weekly chart as well, starting with late April’s low of $75.93. Triple bottoms lead to share price rallies in most instances, and that price level also remains long-term support.
ROKU weekly chart
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