Citron Goes Full Bull On Roku

Roku Inc ROKU popped 4.4 percent Friday on a new endorsement from short seller Citron Research.

“The OTT movement has become a megatrend that cannot be ignored and the numbers around ROKU have completely changed since our Nov. 29 tweet that [have] made us cover our short and actually go LONG ROKU,” Citron’s Andrew Left said in a report.

Left reversed a previously bearish position in recognition of Roku’s lag in the OTT space.

“ROKU is trading at the largest discount ever to OTT peers despite being the only OTT pure play that generates ad revenue,” he said. 

Considering Netflix, Inc. NFLX’s per-subscriber value and the price Walt Disney Co DIS paid for BAMTech, Left considers Roku significantly undervalued. As OTT draws advertising from Facebook Inc. FB and Alphabet Inc GOOGL, Roku could become a more obvious outperformer.

Additionally, Left said he suspects Roku could become an attractive takeover target for Netflix, particularly as it provides access to ad revenue and as its subscriber growth outpaces those of Comcast Corporation CMCSA and AT&T, Inc. T. By Left’s assessment, Roku would rank third in the U.S. if categorized as a cable provider.

“The move to cutting the cord and OTT advertising is real and it is a megatrend that Citron not only does not want to be short, but at this valuation I want to be long." 

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Photo courtesy of Roku.