Why Roku, Inc. Stock Jumped Monday

What happened

Shares of Roku (NASDAQ: ROKU) jumped as much as 21% on Monday; the stock closed the trading day up about 18%. Roku's sharp rise extends its wildly bullish run since it reported its expectation-crushing third-quarter results earlier this month.

The stock's increase on Monday is likely a reaction to a price target increase from an analyst at Needham; Laura Martin nearly doubled her price target for the stock, raising it from $28 to $50. After Roku stock's 18% boost on Monday, the stock is trading at $46.52.

So what

In Martin's report about the price increase, she related Roku's business model to Netflix. While Roku sells hardware, management is primarily focused on monetizing the content on its streaming TV software.

"Like Netflix, we view Roku as a pure play on over-the-top (OTT) TV-viewing growth, but Roku has no content risk," Martin said (via Investor's Business Daily).

Now what

Martin believes Roku is poised to benefit from declines in linear TV viewership, and big investments from tech giants in their own video content services.

But investors should carefully consider the implications of Roku's higher stock price: Shares are up 143% in November alone, giving the company a market capitalization of nearly $5 billion.

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Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Netflix. The Motley Fool has a disclosure policy.