Shares of Roku jumped nearly 20% on Thursday as the streaming device maker delivered a surprise core profit in the third quarter and forecast quarterly revenue above Wall Street estimates on the back of a recovery in the advertising market.

A beneficiary of the pandemic-driven shift toward streaming-based content consumption, Roku has also been lifted by its push to more original content on its own streaming channel to attract subscribers and advertisers.

"We continue to believe there is an acceleration in the secular shift of linear TV advertising dollars moving to over-the-top," D.A. Davidson analysts said.

Excluding items, Roku reported core profit of $43.4 million in the third quarter, compared to analysts' estimates of $31.4 million core loss, according to LSEG data.

"What really stood out to us was the profit upside, with adj. EBITDA turning positive 2 quarters earlier than expected-critical in our view to building long only interest and valuation support," J.P. Morgan analyst Cory Carpenter said.

The improving ad trends are in line with signs of a rebound in the advertising businesses signaled by results from Alphabet, Meta and Snap in recent days.

San Jose, California-based Roku projected net revenue of $955 million for the fourth quarter, exceeding analysts' expectations of $952 million.

The company also forecast adjusted core profit of $10 million, compared to estimates of $53 million core loss.

Average rating of 35 brokerages covering the stock is "hold", with median price target of $83.50, implying a nearly 40% upside to stock's last closing price.

Shares were last trading at $19.20 after climbing nearly 47% this year, through Wednesday's close.

Roku's enterprise value to sales ratio is 1.87, compared with the industry median of 1.08, according to LSEG data.

  - Reuters