Roku Stock Rises After Upgrade. This Big Shift Is Helping the Streamer.

Roku shares can jump 30% from their current level as ad dollars shift from linear TV to streaming, KeyBanc analyst Justin Patterson said in a research note Wednesday. (Dreamstime)

Roku stock was climbing on Thursday after catching an upgrade.

KeyBanc analyst Justin Patterson expects the company to become profitable as ad dollars shift from linear TV to streaming platforms.

Shares climbed 2% to $90.36 in early trading. The benchmark S&P 500 was flat.

Patterson upgraded Roku to Overweight from Sector Weight, issuing a price target of $115 that implies the stock can climb about 30% from its level at Wednesday’s close.

Created with Highcharts 9.0.1Roku stockSource: FactSet

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Roku has trailed the broader market for most of the past three years, but its shares are up 39% since mid-April, when the broader market started rebounding after sweeping U.S. tariffs sparked a brutal selloff.

Patterson thinks the rally can last as companies start to spend more money on advertising on streaming platforms. Roku said last month that it was teaming up with Amazon.com in a bid to boost ad sales, having unveiled a similar partnership with digital marketer The Trade Desk in April 2024.

“Ad dollars are shifting from linear TV to connected TV…Roku is leveraging The Trade Desk and now Amazon as third-party monetization partners, which we believe can improve fill rates over time,” Patterson wrote, adding that Google and Yahoo were other potential partners that Roku could onboard over the next few years.

The analyst also praised Roku’s financial discipline, touting “more discipline on headcount and incremental investments” and forecasting that the company could become profitable under generally accepted accounting principles by the end of next year.

Write to George Glover at george.glover@dowjones.com