Investing.com -- Bank of America reinstated coverage on Roku (NASDAQ:ROKU) Inc with a Buy rating and a price target of $100, citing the company’s potential to capitalize on its vast user base and favorable industry trends.

BofA analysts highlighted that Roku, which has amassed over 90 million active accounts and streamed more than 125 billion hours in 2024, is now entering “Roku 2.0,” a phase focused on monetizing its substantial user base.

"We expect Roku 2.0 to be about monetizing that base while also reflecting the substantial engagement of the Roku platform," analyst at BofA said.

Roku’s array of streaming devices and user-friendly software has secured a market-leading position, and the firm is well-placed to drive revenue and profitability growth in the coming years.

BofA pointed to several multiyear drivers of top-line growth for Roku, including growth in connected TV (CTV) advertising, benefiting The Roku Channel and revenue-sharing opportunities with other ad-supported video-on-demand (AVOD) platforms.

Improving fill rates in Roku’s ad business, which BofA estimates are currently below 40%, leaving room for improvement.

Secular growth in domestic and international streaming and moderating headwinds in the media and entertainment segment.

BofA projects Roku to deliver a 12% compound annual growth rate (CAGR) in revenue, a 37% EBITDA CAGR, and a 50% free cash flow (FCF) CAGR over the next three years.
 
Roku’s combination of attractive top-line growth, improving profitability, and long runway for growth warrants a premium valuation," BofA said.

However, analysts flagged potential risks, including macroeconomic pressures on advertising and competition in the hardware and operating system markets.

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