Roku reaches 50 million accounts. Sean Locke/ EyeEm/ Getty Images
Bank of America stated in a Tuesday note that the 35% decline in Roku shares is excessive and that investors should continue to be bullish on the streaming platform.
Roku's price target of $500 was reiterated by the bank, which represents potential upside of 56% compared to Monday's close.
BofA believes Roku can compete with Amazon in the connected TV space.
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Bank of America stated in a Tuesday note that the three-month-old, 35% selloff in Roku shares is "overdone" as it represents a buying opportunity.
The bank reiterated its $500 price goal for the maker and marketer of the streaming box. This represents potential upside of 56% compared to Monday's close. BofA stated that "Thesis is intact and a secular transition to streaming continues."
Roku's steep decline could be partly due to Amazon's launch of smart-connected TVs and investors shifting to school stocks.
BofA says that these temporary drawbacks are not an issue and Roku will be able compete with smart-connected TVs using Google's Chromecast or Amazon's Fire.
The bank listed a few reasons Roku's investment benefits remain unchanged. These include its large scale, ongoing shift from ad spending to streaming, its large international potential, and its push towards developing original content.
BofA stated that Roku also saw an increase in its average revenue per user, due to "strong performance at upfronts" and "as Roku becomes more attractive for advertisers to spend," BofA added.
Roku shares fell more than 3 percent Tuesday despite a positive note from Bank of America. This was due to a wide sell-off of high-growth technology stocks because of an increase in interest rates.
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