I'm Plotting Out a Trade for Roku Before Earnings Take Center Stage
The company's earnings and technical setup could create a dramatic twist in the stock's action.
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The market is enjoying a little relief rally on Wednesday morning following Trump’s speech at the World Economic Forum. It was an effective speech that helped alleviate some concerns about Greenland. Early market breadth is good with around 72% of stocks in positive territory. I am making some buys and looking for new opportunities.
I have been actively trading short-term volatility in small-cap stocks recently and doing well. I wanted to discuss a trading strategy for a larger-cap name. The goal is to lay out the thinking and strategy for how I might approach a stock that will report earnings in the next few weeks.
It is essential not only to understand the fundamentals of the stock and the situation, but also to examine the technical setup, overall market conditions, and trader psychology.
Comparing Streaming Giants
The stock that I am contemplating is Roku (ROKU) . Roku is a well-known streaming service and has a market cap of $15 billion. It is not a small-cap and has quite a bit of analyst coverage, but it is dwarfed by its biggest competitor, Netflix (NFLX) , which has a market cap of $370 billion.
The first thing to consider is how ROKU is reacting to Netflix earnings. Netflix posted a disappointing report on Wednesday morning and is trading down about 7%. It is down about 40% from its highs and is back at levels it last hit in November 2024. ROKU, on the other hand, is within about 10% of a multi-year high and has enjoyed superior relative strength over the past six months.
This technical action suggests that Roku is successfully competing with Netflix and is gaining ground. Part of Netflix’s problem may be ROKU competition. However, the way that the market works is that all stocks in the sector tend to be punished when a leader is struggling. Roku is indicated down about 1% early on Wednesday morning but has rebounded a bit after the opening bell.
A History of Beating Expectations
A sympathy selloff in ROKU alone may be justification for a ROKU trade, but I am also looking at its upcoming earnings report. ROKU has been a notorious low-baller. It has consistently beat analyst estimates by a substantial margin. Here are ROKU results vs. estimates for the last five quarters:
As you can see, Roku has exceeded earnings per share and revenue expectations every quarter. But just because a stock beats expectations, that does not mean it is going to fly higher. ROKU has seen a pop and drop reaction to good earnings several times, but last quarter it traded sharply higher on its report before it reversed and moved back below the breakout point.
Bullish Revisions and the 2026 Narrative
Analyst sentiment has become quite elevated in the last few weeks. There is a clear upward revision streak in play. In the last 20 days, the average price target has moved from roughly $115 toward a $123 consensus. With the stock currently trading around $102, even the conservative targets suggest a 14% upside, while the high side targets from firms like Evercore and Citizens imply a massive 42% rally.
This shift is driven by the shift in view of analysts, specifically those at Evercore and Wells Fargo, who are basing their targets on Roku’s 2026 potential. They expect a record mid-term political advertising cycle and deeper integration with third party ad platforms to boost margins significantly this year.
Institutional accumulation is also providing a tailwind. Recent 13F filings show major firms like AQR Capital and Two Sigma heavily increased their Roku positions in late 2025, adding millions of shares as the company crossed into profitability.
Technical Setup and Price Targets
The most important issue here is the technical setup as earnings approach around Feb. 12. Expectations are for EPS of $0.28 vs. a loss of $0.24 a year ago. Given ROKU’s tendency to beat estimates, there is likely to be some run up into the news. If that happens and I have a good gain, I will flip some rather than hold into the report.
Analysts remain very bullish. For example, Bank of America recently raised the firm's price target on Roku to $140 from $115 and keeps a Buy rating. The analyst cites a raised calendar year 2027 free cash flow per share estimate and rolling forward the firm's multiple one year. Roku has notable scope to keep expanding its top and bottom line and should benefit from several favorable industry trends along with company specific actions.
According to TipRanks.com, there are 23 Wall Street analysts offering 12 month price targets for Roku in the last three months. The average price target is $127.10 with a high forecast of $160 and a low forecast of $100. The average price target represents a 23.70% change from the last price of $102.75.
The Trade Plan
That is the setup. My thinking is that the stock is good for an initial entry on weakness created by sympathy to the poor Netflix report. I will take a small initial position and then look for volatility to create some movement as it heads into its earnings in about three weeks.
I am not interested in buying and holding ROKU, but I think it has good odds of upside into its earnings report, so I will trade it. I realize that this is not the thinking of a long term investor. This is how an aggressive short-term trader may approach an opportunity. I have made a couple small initial buys and have a current price basis just under $102. Let me know if you have any questions.
At the time of publication, DePorre was long ROKU.
