Roku Stock Hits a New 52-Week High: Is It a Buy?

Roku (NASDAQ: ROKU) has been soaring in recent days amid rumors of a major acquisition, sending the stock to new heights. On Monday, a deal was formally announced, and the stock fell modestly, closing just under $141, up 30% year to date. Not only has it hit a new 52-week high recently, but it's now trading at levels it hasn't been at in multiple years.

Is it likely to rise even higher, or is it too late to buy the streaming stock now that a deal has been announced?

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Fox to buy Roku for $22 billion

On Monday, Fox Corp (NASDAQ: FOX) announced it reached a deal to acquire Roku for an enterprise value of roughly $22 billion, funded through both cash and stock. Shares of Roku were rising even before the news came out, as investors often buy the rumor and sell the news. And on Monday, the stock would actually fall by just under 2%.

The move enables Fox to reach more customers through Roku's popular streaming platform, which more than 100 million households use. It unlocks greater growth and monetization opportunities for the business.

Typically, when an acquisition is announced, the stock of the company being acquired rises to that valuation, unless investors doubt the deal will go through. With Roku's stock rising 14% over the past month, its market cap is now around $21 billion, suggesting investors have a lot of confidence the deal won't run into any hiccups.

Is there a reason to buy Roku stock today?

Fox's acquisition of Roku is not expected to close until the first half of next year. Assuming the deal progresses without issue, it's highly likely Roku's stock won't move much between now and then, since the company's value has been agreed upon. The one wrinkle, however, is that because there's an element of stock involved, it will affect Roku's share price. As part of the deal, Roku shareholders will receive Fox Class A common stock, whose volatility and price movements could determine Roku's stock's direction between now and the completion of the deal. But besides that, there isn't much of a reason to invest in Roku at this stage; any potential upside is limited.

When a stock is at this stage, waiting for an acquisition to complete, there typically isn't much volatility. If the deal falls through, then that's an entirely different story. But for now, investors may be better off looking past Roku and focusing on other growth stocks instead.

David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Roku. The Motley Fool has a disclosure policy.