Investing

Roku shares jump after short-seller reverses call, says he doesn't want to bet against cord-cutting

Key Points
  • "The move to cutting the cord and [over-the-top] 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," the research firm, headed by Andrew Left, said in a report Friday.
  • Roku shares climbed more than 7 percent to close around $38 a share.
  • After the company went public in late November, the stock soared above $50 and Citron said it tweeted the stock would fall back to $28.
People pass by a video sign display with the logo for Roku, a Fox-backed video streaming company, Sept. 28, 2017.
Brendan McDermid | Reuters

Shares of Roku spiked Friday after short-seller Citron Research said it is reversing its negative view on the maker of streaming players, given a major shift away from the traditional cable television subscription model.

"The move to cutting the cord and [over-the-top] 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," the research firm, headed by Andrew Left, said in a report Friday.

Roku shares climbed more than 7 percent, closing at $38.54 a share. The stock is down roughly 25 percent for the year so far.

After the company went public in late November, the stock soared above $50 and Citron said it tweeted the stock would fall back to $28.

"BUT NOW EVERYTHING HAS CHANGED, AND IT IS TIME TO REEVALUATE," the report said, in red capital letters.

Roku CEO: Streaming is just a better way to watch TV
VIDEO7:5907:59
Roku CEO: Streaming is just a better way to watch TV

Citron said its reassessment of Disney's acquisition of DTC streaming service BAMTech "implies that ROKU could be worth about 3x its current value."

The research firm also pointed to the surge in Netflix shares, up 80 percent over the last six months. "The trend to OTT cannot be ignored and $NFLX is telling us valuation is out the window in this megatrend," Citron added in a tweet.

On Thursday, Netflix's market capitalization briefly surpassed that of Disney, making Reed Hasting's company the largest pure media company in the world by market value. Netflix's market value topped Disney's again in Friday morning trading.

Disney has bid for certain assets of Twenty-First Century Fox in an effort to compete with Netflix on dominating video streaming.

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