Why Roku Stock Jumped 21% in June

Key Points

• Roku announced a new partnership with Amazon last month.

• The company is also gaining share in smart TVs.

• Roku is on track to report an operating profit next year.

Shares of Roku (NASDAQ: ROKU) were moving higher last month after the streaming distribution leader announced a new integration with Amazon Ads, and its Roku-branded TVs took market share in May, according to third-party research.

According to data from S&P Global Market Intelligence, the stock finished the month up 21%, as it also benefited from a broader upswing in risk-on tech stocks toward the end of the month.

As you can see from the chart, the stock moved higher primarily in two stages.

ROKU data by YCharts

Roku is executing

Roku's biggest day last month came on June 16, as the stock jumped 10.4% after it announced a new partnership with Amazon Ads.

The integration will give advertisers access to Roku's connected TV inventory, which it says is the largest authenticated CTV footprint in the U.S., exclusively through Amazon DSP (demand-side platform).

In initial testing of the integration, advertisers reached 40% more unique viewers with the same budget.

The move should increase demand for advertising on Roku, especially if the ROI numbers above hold true at scale.

Additionally, in June, Citizens JMP said that Roku took share of TV listings in May on Amazon and Target, showing that its Roku-branded Smart TVs also appear to be gaining market share, another positive sign that its strategy is working.

Roku is also coming off a solid first-quarter earnings report, which included 17% platform revenue growth and 16% revenue growth to $1.02 billion.

Image source: Getty Images.

Can Roku keep climbing?

The partnership with Amazon could prove to be lucrative, as the tech giant is building out its DSP in an attempt to challenge The Trade Desk, the leading independent DSP.

Given Amazon's size and its existing business in advertising and streaming players, an acquisition wouldn't be out of the question, though such a move could face regulatory scrutiny.

After years of struggles since the pandemic, the stars may finally be aligning for Roku, as the company appears to be gaining momentum with its smart TVs, took a step forward with the Amazon partnership, and expects to generate a generally accepted accounting principles (GAAP) operating profit next year.

As the leading streaming distribution platform in North America, Roku has a lot of potential, especially as its business model is scalable, meaning it should turn profitable as it grows. If the economy remains solid, Roku looks like a good bet to continue to move higher.

The company is due to report second-quarter earnings report on July 31, with analysts calling for 10.6% growth to $1.07 billion. If Roku can top those expectations, the stock could take another leg up.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jeremy Bowman has positions in Amazon, Roku, Target, and The Trade Desk. The Motley Fool has positions in and recommends Amazon, Roku, Target, and The Trade Desk. The Motley Fool has a disclosure policy.