Shares of Roku (NASDAQ:ROKU) have more than tripled in price since the start of the year after some consecutive quarterly reports featuring better-than-expected results. While some analysts think the stock has climbed too far, too fast, there's a strong counterargument that Roku's long-term potential is just starting to shine through.

Needham analyst Laura Martin raised her price target for the stock to $120 per share from $85 and says Roku has four advantages that could propel it higher. Here are the four reasons Roku's stock price could keep climbing.

A Roku remote on a table next to a bowl of popcorn.

Image source: Roku

1. Digital TV advertising scale

Roku is uniquely positioned to grow its ad inventory compared with other streaming platforms, including Amazon's (NASDAQ:AMZN) Fire TV and Apple's (NASDAQ:AAPL) Apple TV. Roku is seen as less of a competitive threat to video streaming services and more of a partner. Meanwhile, Amazon operates one of the most popular video streaming services in the world with Prime Video. Apple will launch its own premium streaming video service this fall.

As a result, Roku has more than 4,000 ad-supported channels, according to Martin. Martin also estimates Roku users are more engaged, streaming more hours than Fire TV users or users on other platforms. Indeed, Roku's total streaming hours have managed to accelerate for five straight quarters.

Greater ad inventory ought to help Roku overcome some of the advantages of its larger competition in digital advertising as it makes a name for itself in the space.

2. Revenue upside from new streaming services

Several high-profile video streaming services will come to market over the next year, and Roku will be a key part of getting in front of audiences. When Apple announced its plans for its subscription video service, it wasn't a huge surprise that Roku made the list of its distribution partners, even though Apple sells its own streaming device.

As more streaming services come to market, Roku ought to be a big participant in their success. Roku could generate additional revenue from distribution agreements with various premium streaming services in exchange for handling billing and payment processing. That represents a stable recurring source of revenue for Roku to augment its ad revenue, which currently accounts for the vast majority of its platform revenue.

3. A large audience that isn't going anywhere

Roku ended the first quarter with 29.1 million active users. While that's less than Amazon's 34 million Fire TV users, Martin points out a unique advantage that might make Roku users more loyal: Around half of Roku's users are Roku TV owners.

Roku TV is Roku's smart TV platform. Having the Roku operating system built right into the television makes users more engaged and makes Roku harder to replace with a competitor. Consumers replace a television maybe once a decade. More than one-third of smart TVs sold in the U.S. last quarter were Roku TVs.

Martin believes Roku's audience gives it pricing power in negotiating revenue share agreements. A streaming service that's not available on Roku devices probably wouldn't do very well.

4. A potential acquisition target

Even after tripling in price over the past five months, Roku still has a market cap of less than $11 billion. That's small enough that it's still a viable acquisition target for numerous other businesses. Roku might fit in as an acquisition for one of its hardware competitors or from a media company that uses its platform to distribute streaming video content.

Any acquisition offer will include a premium over the current price, adding upside to Roku's stock. While the potential for an acquisition might provide support for the stock price, it's not a good reason in and of itself to invest in the company.

A company at the forefront of a megatrend

Roku is in an enviable position in the streaming video market. Its sizable and engaged audience makes it a top source for digital video ad spending and a necessary partner for streaming services looking to attract an audience of notable size. Roku is uniquely positioned to bring together the most streaming hours, content providers, and advertisers to the benefit of all parties involved. As all three continue to grow, Roku ought to see further upside in its stock price.