Oversold Roku Stock Bounces After "Top Pick" Tag

The analyst cited strong growth and M&A potential

The shares of Roku Inc (NASDAQ:ROKU) are trading up 5.1% today at $28.55, after Needham called the streaming device stock its "Top Pick for 2019." The analyst in coverage cited strong growth potential, and said Roku could be an attractive takeover target.

This bullish positioning toward Roku is hardly unusual, with nine of 13 analysts calling the stock a "buy." Plus, the average 12-month price target of $60.46 is more than double the equity's current perch.

Options traders have remained upbeat toward ROKU stock, too. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day call/put volume ratio of 2.85 ranks in the 75th annual percentile, meaning calls have been bought to open over puts at a quicker-than-usual clip.

On the charts, however, Roku shares have done little to warrant such optimism. Since topping out at a record high of $77.57 on Oct. 1, the shares have plunged almost 63% -- and hit a 13-month low of $26.30 during the broader Christmas Eve sell-off. As such, ROKU's 14-day Relative Strength Index (RSI) closed Monday at 20 -- well into oversold territory -- suggesting today's bounce may have been in the cards.